WS Atkins plc Annual Report 2014

Transcription

1 WS Atkins plc Annual Report Plan Design Enable

2 Good results and significant progress on our strategy. >

3 Contents Strategic Report 01 Strategic Report 02 Group at a glance 04 Results 06 Chairman s Statement 08 Chief Executive Officer s Statement 11 Strategy 12 Our business 14 Our markets 16 Our strategy 60 Board of Directors 62 Directors Report 66 Corporate Report 74 Nomination Committee Report 76 Audit Committee Report 81 Remuneration Report 106 Independent Auditor s Report 18 Business Review 21 United Kingdom and Europe 28 North America 31 Middle East 34 Asia Pacific 37 Energy 41 Financial Performance Review 44 Principal risks and uncertainties 48 Human Resources Review 54 Corporate Sustainability Review Strategic Report Financial Statements 112 Consolidated Income Statement 113 Consolidated Statement of Comprehensive Income 114 Consolidated and Parent Company Balance Sheets 116 Consolidated and Parent Company Statements of Cash Flows 117 Consolidated Statement of Changes in Equity 118 Parent Company Statement of Changes in Equity 119 Notes to the Financial Statements 179 Five-year Summary Financial Statements Corporate Information 182 Company secretary and registered office 182 Financial calendar 182 Shareholder services Corporate Information You can help us to reduce our environmental impact by opting to receive shareholder communications online at:

4 02 Strategic Report Group at a glance From post-war regeneration and the advent of nuclear engineering to high speed rail and the integrated sustainable cities of the future, our people s drive to ask why has delivered design, engineering and project management excellence on some of the world s most complex challenges. >

5 Strategic Report 03 Group at a glance continued Our business segments The Group is managed according to a regional model and this management structure is reflected in our segmentation. United Kingdom and Europe We deliver engineering and technically integrated design, together with project and cost management services, to a wide range of clients in the public, regulated and private sectors. Our areas of operation include aerospace, defence, education, environment, infrastructure design, transportation and water. Our European business comprises operations in Denmark, Ireland, Norway, Poland, Portugal and Sweden. North America We provide infrastructure planning, engineering, construction management, environmental consulting, urban planning and programme management services to state and local government clients, federal agencies and private businesses. Middle East In the Middle East we provide a full range of design, engineering and project management services for buildings, transportation and other infrastructure programmes from our eight centres across the region. Strategic Report Revenue 998.3m Revenue 380.9m Revenue 168.4m Employees 9,544 Employees 2,836 Employees 2,071 Find out more on page 21 Find out more on page 28 Find out more on page 31 Asia Pacific In Asia Pacific we provide engineering, planning, urban design, architecture and rail design services. In mainland China our focus is on urban planning, alongside architecture and landscape architecture design. In Hong Kong we deliver services in urban rail development and highways/bridge design. Revenue 100.5m Employees 1,498 Find out more on page 34 Energy Our Energy business operates across multiple geographies with our main centres in the UK, North America, Australia and the Middle East. We provide engineering and project management services and we are actively increasing our presence and capabilities in the energy market, including addressing allied issues such as climate change, sustainability and energy security. Revenue 169.6m Employees 1,461 Find out more on page 37 Notes 1. Full time equivalent staff at 31 March including agency staff. 2. There are an additional 79 staff undertaking Group functions. Related sections Our business Find out more about our business on page 12 Our markets Find out more about our markets on page 14 Financial Statements Corporate Information

6 04 Strategic Report Results Dividend increased by 5.5%, reflecting the Board s confidence in the Group s prospects. > Revenue +2.6% Underlying profit before taxation +7.3% Underlying diluted EPS Pence +3.8% 1, , , , , R R 14 Headcount -2.3% Dividend Pence +5.5% Underlying operating margin % +0.3pp 15,601 17,522 17,420 17,899 17, Notes 1. Revenue excludes the Group s share of revenue from joint ventures. 2. Underlying operating margin is before exceptional items, amortisation and impairment of intangible assets recognised on acquisition and material transaction costs associated with acquisitions, and relates to continuing operations. 3. Underlying profit before taxation additionally excludes any profits or losses and costs of disposals. has been restated for the amendments to IAS 19, Employee benefits. 4. Underlying diluted earnings per share (EPS) is based on underlying profit after tax and allows for the dilutive effect of share options. has been restated for the amendments to IAS 19, Employee benefits. 5. Headcount is shown on a full time equivalent basis at the year end, including agency staff. 6. Dividend relating to the year comprises the interim dividend paid in the year and the proposed final dividend.

7 Strategic Report 05 Results continued Atkins proactively positions itself in a number of markets. > Strategic Report End market analysis Aerospace and aviation 1% 3% North America UK and Europe Defence and security Education Other Rail Roads Water and environment Aerospace and aviation Defence and security Other Roads Water and environment Middle East 1% 1% 1% 2% 1% 1% 5% 1% 2% 1% 1% 3% 2% 1% 2% 1% 4% 1% 5% 6% 2% 3% 7% 1% 1% 4% 6% 11% 3% Financial Statements Asia Pacific Energy Public sector: local government Public sector: national government Regulated Private sector Corporate Information 1% 5% 4% 6% Related section Our markets Find out more about our markets on page 14

8 06 Strategic Report Chairman s Statement In our 75th year, we celebrated our worldwide reputation for excellence in design, engineering and project management. > Performance I am pleased to report that the Group delivered another set of good results. During the year, we have made significant progress on the delivery of our strategy. Our operational excellence programme has been rolled out into our North America and Middle East regions. The portfolio optimisation pillar of our strategy is now almost complete, following the sale of our UK highways services business to Skanska, the final stage of which was completed in early October. The disposal of our construction management at risk business, Peter Brown, was also completed in a similar timeframe. The diversity, breadth and depth of our geographic and sector spread continue to provide the Group with growth opportunities, particularly in our sector focus area of Energy and our regional growth area of Asia Pacific. We were delighted to welcome Confluence Project Management Pte. Ltd., the project and programme management business headquartered in Singapore, to the Group in October. The team is already fully integrated with our Faithful+Gould business across the regions and has added an attractive client base. Furthermore, we are now reaching the final stages in achieving regulatory approval for the acquisition of Nuclear Safety Associates Inc., an engineering and technical services firm based in North America.

9 Strategic Report 07 Chairman s Statement continued We welcomed Confluence Project Management Pte. Ltd. to the Group in October. People I would like to thank our people for their quiet brilliance in helping us to deliver some of the most time-critical, complex solutions to our clients this year. We have a highly engaged and aligned team of people who continue to work together to make the world just that little bit better as a result of the projects they deliver. I would also like to thank families and friends for supporting our people as they go about their work for Atkins in all corners of the world. Maintaining our focus on bringing more young people into the engineering sector, we welcomed 500 new graduates across the Group and accelerated our apprentice programme to attract school leavers by recruiting over 90 apprentices in the UK. This year we worked hard to achieve our commitment to build a diverse organisation. We created a women s leadership council to enable the 50 most senior women in the business to support, mentor and encourage the next generation of Atkins female leaders. Also, women s professional networks around the world became more active in their work to ensure women feel well-connected across the Group. In addition, the UK business was recognised by workingmums.co.uk, winning awards for Overall Top Employer and Innovation in Flexible Working. I am personally leading an industry group for the UK s Royal Academy of Engineering with the purpose of increasing the number of women engineers in the sector. Our 75th anniversary celebrations in gave us an excellent opportunity to involve and unite our people around the world. We joined together for celebratory events and recognised 89 colleagues with the Sir William Atkins medal for their outstanding achievements. During the year we also invested in our employer brand known as the Atkins Way, which is a celebration of how our people behave and what motivates them. We believe that nobody can tell the story of an organisation as effectively and as genuinely as the people who work for it, so we are using the Atkins Way as the foundation of all our communications with existing and potential colleagues. Board of directors We welcomed a number of new Board members this year as Admiral the Lord Boyce retired from the Board and Joanne Curin stepped down as she took up a new position in the Middle East. I would like to thank both for their service, support and commitment to Atkins. Lord Boyce has been highly influential as our senior independent director and I have greatly appreciated his wise counsel. We were pleased to appoint Fiona Clutterbuck as senior independent director in his place and to welcome Allister Langlands and Thomas Leppert, who joined the Board as independent non-executive directors during the year. Allister has succeeded Joanne as chairman of the Audit Committee. Joanne has made a great contribution to the Board and to the leadership of the Audit Committee over the last five years and for this we thank her. Rodney Slater will be retiring from the Board after our annual general meeting on 30 July. He has served the Board for three years and I would like to thank him for his input during that time. Alun Griffiths, our Group HR director, will also be retiring from the Board after our annual general meeting on 30 July. Alun has been with the Group for 28 years and has served on the Board as an executive director for the past seven years. I would like to thank Alun for his longstanding dedication to the Group and for his contribution to the Board. He will be succeeded as Group HR director by James Cullens, who joins us from Hays plc and who will join the Board on 1 July. Dividend The Board is recommending a final dividend of 23.25p per ordinary share in respect of the year ended 31 March, making the total dividend for the year 33.75p (: 32.0p), an increase of 5.5%. If approved at the Company s annual general meeting, the dividend will be paid on 22 August to ordinary shareholders on the register on 11 July. Further details regarding dividend payments can be found in Investor Information (page 182). Outlook As we look forward to the new financial year, we are confident of making further progress towards our strategic goals. While our markets and clients needs are constantly evolving, we will continually seek ways to deliver their requirements effectively and efficiently. We believe our exposure to transportation markets across the UK and North America provides us with a good backlog of business. Our Middle East region is benefiting from our more focused approach and in Asia Pacific we are investing to diversify beyond our historic Hong Kong base. In Energy we see an attractive pipeline of opportunities. Overall, we see positive momentum in the year ahead. Allan Cook CBE Chairman 11 June Related sections Human Resources Review Find out more about our people on page 48 Our Board of Directors Find out more about our Board of directors on page 60 Corporate Information Financial Statements Strategic Report

10 08 Strategic Report Chief Executive Officer s Statement We have achieved a year of good results with a highly motivated team of employees around the world. > We have achieved a year of good results with a highly motivated team of employees around the world. Based on strong customer focus and the implementation of our strategy we have built a good momentum of profitable growth. In all areas of our business, commercially as well as technically, we have encouraged new thinking and delivered innovative solutions to our clients. We made significant progress in implementing our three-pillar strategy of operational excellence, portfolio optimisation and focused growth in defined segments and regions. This has resulted in tangible progress evidenced by solid growth in profitability and excellent cash performance. Business position Our underlying profit before tax was 106.4m, an increase of 7.3% over last year s restated profit¹ of 99.2m, on revenue that increased by 2.6% to 1.75bn. We believe underlying profit is a more representative measure of performance, removing the items that may give a distorted view of performance. In the current year we have removed profits on disposals and costs associated with disposals of 10.5m (: 4.5m), amortisation of acquired intangible assets of 2.7m (: 10.0m), together with one-off pension gains in the comparative figures of 4.3m arising as we continue to actively manage our pension liabilities. The unadjusted reported profit before tax was 114.2m ( restated 1 : 98.0m). The Group s profit after tax for the year of 96.3m ( restated 1 : 84.3m) is shown in the Consolidated Income Statement (page 112). 1 The results for the year to 31 March have been restated to reflect changes to accounting standards with regards to the treatment of pension costs (IAS 19 (revised 2011)).

11 Strategic Report 09 Chief Executive Officer s Statement continued We made significant progress on our three-pillar strategy. Headcount closed the year at 17,489 (: 17,899), reflecting both the sale of non-core businesses totalling 1,165 and underlying headcount growth and the acquisition of Confluence Project Management Pte. Ltd. (Confluence). Our United Kingdom and Europe region performed well during the year, driven primarily by the UK where we experienced good momentum in our core markets. The use of our global design centres (GDCs) in India to deliver work for our UK business also enhanced our performance and increased our competitiveness. We achieved particularly good volumes in the retained highways consultancy and rail businesses. In addition we benefited from a contract gain share as a consequence of the M25 design project exceeding its delivery targets, in part offset by outstanding variation negotiations on certain rail signalling contracts. The UK water and environment business had a busy first half with peak volumes associated with AMP5 and feasibility studies on phase one of the HS2 high speed rail project. We were pleased to see opportunities re-emerging for our design and engineering business from the UK education market and infrastructure work associated with nuclear new-build projects. We remain well positioned in our defence business following the change in the UK Government s approach to reforming its defence procurement activities. Our Scandinavian businesses remain stable and the market well-funded, while our Faithful+Gould business performed well in a reasonably tough environment. While the markets in which we operate in North America were steady, we have achieved good progress in our North America region, with an increase in operating profit and margin. This year we established a new leadership team and have focused on improving efficiency and reducing overheads in the business, as part of the roll-out of our operational excellence programme. We benefited from good new contract wins in the wastewater management, energy, marine and emergency response areas of our business, and were reappointed on significant contracts for the Federal Emergency Management Agency (FEMA). Our transportation business continued with its positive performance and was awarded a number of new contracts including commissions to oversee transport solutions for highways authorities in Florida, Texas and Georgia. In addition, our Faithful+Gould business in the region had a good year with an improvement in margins and profitability, benefiting from continued economic recovery in the private sector. I am pleased to report that our Middle East region had an improved year, thanks to a particularly good second half which included contract wins for the Riyadh and Doha Metros. In addition, the infrastructure sector remains buoyant in Qatar and Abu Dhabi with good opportunities in the Kingdom of Saudi Arabia. Of particular note was the fact that the property sector is showing early signs of an upturn where we are working on a number of new projects, including the Dubai Opera House and the residential element of Al Habtoor City, along Dubai s main arterial road. In a market with good opportunities, we continue to be selective about the projects on which we work to ensure we maintain a strong financial performance in the region. Our Faithful+Gould business in the region performed well during the year and was boosted by some 71 new colleagues in the region as the result of the Confluence acquisition. As with the UK region, the Middle East region s use of our GDCs in India is improving our performance and competitive position. Our Asia Pacific region had a good year, with strong performance in our core markets of Hong Kong and China. The diversification from our strong historic rail base in Hong Kong continued throughout the year and we are now working on opportunities with local design institutes and Chinese contractors. In mainland China we continue to benefit from projects as a result of rapid urbanisation and look to expand our footprint into South East Asia, focusing on rail projects in Malaysia and architectural opportunities in Vietnam. The acquisition of Confluence, through our Faithful+Gould business in the region, has enabled us to achieve particular success in Singapore on several high profile projects in more diverse sectors. Good organic growth continues to be delivered by our Energy business, where we are well-positioned in the buoyant markets of oil and gas and nuclear and where we are seeing a steady increase in our share of the conventional generation and renewable markets. We are continuing to strengthen our service offering through partnerships with companies offering complementary skills. This is helping us to secure strategic opportunities around the world, with a recent example being our selection as preferred bidder on a new contract with Sellafield Ltd in joint venture with Areva and Mace. During the year we also agreed to purchase Nuclear Safety Associates, a 130-people engineering and technical services firm, which will enhance our offering in safety and regulation experience in US nuclear technology. Corporate Information Financial Statements Strategic Report

12 10 Strategic Report Chief Executive Officer s Statement continued Priorities Our drive to become a more responsible and sustainable organisation remains of paramount importance. Right at the top of this commitment is health and safety. Our See it, Stop it, Save a life mantra empowers our people to stop work immediately whenever anything appears unsafe. Our leaders actively drive a culture of safety and demonstrate their commitment through the use of safety moments, taking time out at the start of meetings to remind everyone about its importance. We are demonstrating strong industry leadership in the Middle East through the launch of the Atkins minimum requirements for construction safety, which are enabling us to influence clients and contractors to raise health and safety standards on their projects. Our efforts were recognised at Construction Week Qatar s annual awards where we won Health and Safety Initiative of the Year. We were also recognised in the UK for the third consecutive year with the award of a Gold Award for Occupational Safety from the Royal Society for the Prevention of Accidents. This year we launched a set of principles to frame our approach to corporate sustainability. These principles are based on three pillars: a society for our future; an environment with a future; and a responsible business of the future. Our strategy remains clear. We will drive shareholder value by focusing on growth, selectively increasing our geographic footprint through targeted international expansion while continuing to deliver improved financial performance in all our markets and geographies. In the medium term, our goal remains to generate a margin above 8% across all our businesses. We will grow organically and through acquisitions. In, we continued work to deliver our strategy. Following the successful implementation of our operational excellence programme to optimise financial delivery in the UK, this has now been extended to our Middle East and North America regions. In the area of portfolio optimisation, we completed the sale of our UK highways services operations and the disposal of the Peter Brown construction management at risk business. In the domain of sector and regional focus, our Energy business has benefited from ongoing investment and during the year we agreed to acquire Nuclear Safety Associates. In addition, attractive opportunities for growth exist in our Asia Pacific region as we expand our activities from our historic base in Hong Kong into new countries such as Malaysia, Singapore and Vietnam. Our acquisition of Confluence during the year was part of this strategy. Conclusion It is thanks to our people around the world that we have achieved these good results. Through our 75th anniversary celebrations, our people have demonstrated that they are proud to work for Atkins. In turn, we are proud of our people, the Atkins family, for the way they work together, with colleagues and clients, finding solutions to make the world just a little bit better, creating a better future for us all. We have delivered another year of good results and proved that our consistent strategy is working. Whilst organic growth remains our priority, we will also seek acquisitions that add new skills or expand our regional presence. We were particularly pleased with our successes in this area in the year. We start the new financial year with an attractive pipeline of opportunities across the Group and a strong balance sheet. Our operational excellence programme will ensure our continued focus on improving our overall operating margin, towards our 8% goal. Overall we believe /15 will be another year of growth. Prof Dr Uwe Krueger Chief Executive Officer 11 June

13 Strategy Strategic Report 11 The primary objective of the Group is to create shareholder value through profitable growth. > Strategy Over the next few pages we outline our business, our markets and our strategy. Our business Our markets Our strategy Strategic Report Our core business is helping our clients to plan, design and enable capital programmes that resolve complex challenges in the built environment. Due to the breadth of activities which the Group undertakes, Atkins proactively positions itself in a number of markets. Our strategy is to focus on growth and, selectively, to increase our geographic footprint through targeted international expansion. What we do Plan Design Enable Infrastructure development Our locations Our capability Our competitive advantage Trends Market size and share Competitive environment United Kingdom and Europe North America Middle East Asia Pacific Energy Faithful+Gould Business focus Group strategy Pillars and progress Operational excellence Portfolio optimisation Sector and regional focus Corporate Information Financial Statements Find out more on page 12 Find out more on page 14 Find out more on page 16

14 12 Strategic Report Strategy continued Our business What we do Our core business is helping our clients to plan, design and enable capital programmes that resolve complex challenges in the built environment. The solutions we provide range from small advisory and design projects to large programme management engagements. Areas of our business Strategy Planning Management Asset Construction Management Enable Our clients trust us with the management of projects, people and issues, ensuring that deadlines are met, costs are controlled and success is delivered. Plan We plan every aspect of our clients projects, from cost and risk planning, feasibility studies and logistics, to impact assessments and stakeholder engagement activity. Design Atkins designs intellectual capital such as management systems and business processes. We also design physical structures such as office buildings, schools, bridges and highways. Concept Programme and Project Management Design and Engineering

15 Strategic Report 13 Strategy continued Our business Infrastructure development Engineering services are key to infrastructure development. When clients are undertaking capital projects they need professional support with planning, designing and enabling activities from policy, strategic choices, feasibility, concept and detailed design through to project and programme management, implementation and operation. At each stage, services are sought from design and engineering consultancies. Large or particularly complex projects may only be able to be undertaken by organisations of scale, where skills must be applied in combination to deliver the project. Our locations We have extensive geographic reach through a network of offices in a number of countries around the world. With a presence in the UK, Europe, North America, the Middle East and Asia Pacific, the strength of the Group lies in its breadth and depth of technical expertise. Many years ago, Atkins had the foresight to establish a team of professionals in India to help us to respond to the challenges of finding skilled resources. Through careful development and investment, our global design centres (GDCs) in Bangalore and Delhi have become a competitive advantage for us, providing capacity, efficiency and professional expertise, helping our clients to achieve their strategic goals. Our competitive advantage The nature of our work means that at first glance there appears to be a number of firms with similar capabilities. However, our competitive advantage is derived from the quality, depth and breadth of those capabilities and the way in which they are marshalled and applied in our approach to solving client problems. With a worldwide pool of talent on which to draw, key strengths of the Group lie in the engineering focus and technical brilliance of the specialists we employ. Atkins has a deserved reputation for integrity with reliable experts not only as key assets of the Group but defining the culture of the organisation. Strategic Report Our capability Our business may be characterised as follows: we are a people business selling specialist output from our talented teams the services we provide demand high value added critical thinking and expert judgement Financial Statements we operate in many parts of the world and in many market sectors we undertake projects of different sizes but increasingly those of larger scale and complexity. Corporate Information

16 14 Strategic Report Strategy continued Our markets Trends Urbanisation The world population is increasingly moving to urban environments. The UN estimates that more than half of the world s population now lives in cities and that by 2050 this number will be almost two thirds of a projected nine billion population. Not all regions of the world have reached the 50% level and the urbanisation trend is most marked in growth markets outside the developed world. It is anticipated that urban growth will be concentrated in Africa and Asia over the next few years. According to the UN, it is expected that half of the population of Asia will live in urban areas by 2020, while Africa is likely to reach a 50% urbanisation rate in This overarching driver will create ongoing demand for new and improved infrastructure in a number of allied sectors. Technology Technological advances in the design and engineering of projects are having an impact on the industry. Through Building Information Modelling (BIM) and other tools, 3D, 4D and 5D (including time and cost information) design is becoming more prevalent. In addition, the application of large data sets and cloud-based applications to analysis (historic and predictive) is creating new ways of looking at projects in the planning and design stage, and is simplifying and speeding up infrastructure construction and maintenance efforts. Work delivery In more and more situations we are moving parts of the work we undertake for our local clients to remote locations. This may be to one of our GDCs or offices in other parts of the world. The driver may be complexity, where we undertake the work in our centres of excellence for a particular discipline, or cost, where we utilise our lower cost regions to best effect. Seamless delivery and robust processes are required. Market size and share There are a number of industry surveys that capture the top firms in regions and sectors by revenue. The calculation of true market share remains difficult due to the large number of very small firms in each region that do not form part of the surveys. However, we use the information available together with our own industry knowledge to infer our own view of market share. We estimate that the market for our skills in selected geographies is in excess of 100bn p.a. and, such is the fragmented and extensive nature of the competition, we command an overall share of less than 2% of our addressable market. Market shares vary enormously by individual sector from around a third in UK rail signalling works/structures down to very small market shares in niche activities. By region, we estimate our market share as around 10% from our significant position in the UK and, demonstrating the potential for growth, around 2% in the Middle East and less than 1% in each of the US, Europe and Asia Pacific. Competitive environment Due to the breadth of activities which the Group undertakes, competitors are generally sector- and service-specific. Each region of the world is characterised by a small number of large players, often with multinational reach, together with a large number of smaller companies which tend to have very specific niche skills. Typically, therefore, competitors at the local level are divisions of large companies or smaller privately owned specialists. Barriers to entry vary across the sectors in which we operate from very high in areas such as nuclear, where specific domain knowledge and certification is required, to much lower in more generalist areas of civil infrastructure design and project management. Business focus

17 Strategic Report 15 Strategy continued Our markets United Kingdom and Europe North America Middle East Asia Pacific Energy Context Focus Risks Renewed demand for infrastructure capital expenditure with large project pipeline including HS2, Crossrail 2, Thames Tunnel, airport expansion Rail and water markets are well-funded and the Highways Agency is providing longer term planning Remediation and regeneration opportunities are increasing and there is ongoing demand for our capabilities There are a number of major infrastructure programmes in transportation, energy, federal, state and city markets Macroeconomic conditions are improving with private sector growth driven by energy sector investment, and interest in transportation and water Current funded markets robust but project delays likely to remain due to federal funding pressures Wide range of large capital investment programmes being sustained Socio-political drivers in market augmenting traditional direct link between infrastructure spend and oil price Series of metro projects are now coming to market and several property schemes have emerged Continuing opportunities in Hong Kong for major infrastructure developments based upon government spending commitments The People s Republic of China market for urban planning and architecture continues to grow Strong regional growth in South East Asia with opportunities in infrastructure, building design and planning Overall low single digit world market growth rate, but substantially higher in specific sectors and locations Move by oil majors to operational expenditure from capital expenditure Primary focus on core UK and European sectors, maintaining market leadership positions Drive growth in well-funded infrastructure areas Capitalise on increased levels of project funding in roads and continue to focus on higher margin work in rail Continue to develop opportunities in other sectors Develop security and aerospace offerings in response to market demand Focus on major infrastructure programmes in transportation, energy, federal, and state/local markets Strengthen ability to compete for, win and deliver major projects and programmes Flexible, scalable, technical and professional organisation to deliver work Sector-led focus on major projects and programmes in rail, mixed-use infrastructure and property Geographic focus: activity primarily in the UAE, the Kingdom of Saudi Arabia and Qatar Diversify away from Hong Kong rail market Ongoing activity in urban planning in China Strategic options in Malaysia, Singapore and Vietnam Continue with growing oil and gas and internationalising nuclear, grow renewables from low base Deliver larger projects such as Sellafield Silos Direct encapsulation Plant (SDP) project, as part of an equal three-way joint venture with Mace and AREVA (a.m.a.) Key risks revolve around potential for continuing and increased government austerity measures impacting investment in public sector infrastructure Economic conditions could lead to reduced levels of private sector infrastructure spend Main risks are in connection with uncertainties around continued state, city and private investment in core infrastructure Increased complexity of commercial conditions Potential for project delays Regional stability Access to work in mainland China Continuing demand from Hong Kong Predictability and deliverability of projects coming to market in the wider South East Asian region World energy demand does not seem to be slackening but there is uncertainty around the potential impact of shale oil and gas on the market Safety, environmental and reputational issues remain key Corporate Information Financial Statements Strategic Report

18 16 Strategic Report Strategy continued Our strategy Group strategy The primary objective of the Group is to derive shareholder value through profitable growth. The main strategy for the Group was articulated in Annual reviews test progress and the continuing relevance of each aspect of the strategy. In 2011 we outlined our primary objective of developing the operating margin, which remains a key target and determinant of quality of business. Our medium-term target is to generate a margin above 8% across all our businesses and regions. Our secondary objective is to adjust the geographic balance of the Group s operations over time and progress towards our ultimate aim to generate more than 75% of our revenue from our non-uk and Energy businesses, resulting in less than 25% of our revenue being derived from the UK. We will continue to direct investment into areas in which we see value as we look to grow organically and supplement that growth with appropriate acquisitions. Rigorous acquisition criteria are applied to potential targets to ascertain the appropriateness of the skill-set and cultural fit and to assess whether these opportunities will usefully accelerate our strategy. Our strategic pillars Profitable growth Drive margins >8% Reduce dependence on UK Grow organically and by acquisition Operational excellence Portfolio optimisation Sector and regional focus

19 Strategic Report 17 Strategy continued Our strategy Pillars and progress Operational excellence The fundamental building block of any successful strategy is the performance of the underlying business. We continue to drive operational performance across the Group with a distinct focus on optimising financial delivery and we are successfully implementing our operational excellence programme. This involves a continued focus on staff utilisation and operating margin, together with an increased emphasis on billing and cash collection. Following successful implementation in the UK, this programme now extends to our businesses in the Middle East and North America. With this foundation we will be well placed for progress in the future towards our medium-term operating margin target of 8%. Portfolio optimisation A second aspect of ensuring we are well positioned for the future is an ongoing review of the businesses in our portfolio, focusing the Group on higher growth, higher margin activities. We have made excellent progress in this area over the last few years with the sale of our UK highways services operations and the disposal of the Peter Brown construction management at risk business, together with the sale of our UK asset management business and the disposal of our non-controlling interest in the RMPA (Colchester Garrison) private finance initiative. Sector and regional focus We organise the Group along regional lines with the addition of Energy as a sector addressing global clients. While the form follows the management of the Group we also undertake pan-group coordination of key sectors in multiple jurisdictions. As we look across our portfolio it is clear that a number of our existing sectors have attractive growth prospects. This is particularly true of our Energy business, which has for some time benefited from ongoing investment and is reported separately in our results. As an example of our investment in this sector, during we agreed to acquire Nuclear Safety Associates (NSA) in North America. Other sectors on which we place a particular focus will evolve over time. Over the last few years we have been investing in aerospace and security. While security issues remain at the forefront of many clients priorities, and despite good growth in activity, the level of client investment has, as yet, not resulted in a business of scale in this area. We still see good opportunities in aerospace particularly in North America, where we will focus the Group s efforts, but the aerospace market in Europe is likely to be a challenging environment in the near future. The area of particular regional focus has been Asia Pacific. We see excellent opportunities in South East Asia as we expand our activities from our historic base into new countries such as Malaysia, Singapore and Vietnam. Our acquisition of Confluence in was a further step in this regard. We will continue to redirect and leverage resources and technical capabilities to address sectors and regions in which we see potential. Acquisitions remain possible to supplement organic growth as we look to balance our client, sector and geographic mix. Corporate Information Financial Statements Strategic Report

20 18 Strategic Report Business Review Overview of the business and performance in the year We resolve complex challenges in the built environment. > Our business Our core business is helping our clients to plan, design and enable capital programmes that resolve complex challenges in the built environment. We are able to provide our clients with professional support to plan, design and enable projects from policy, strategic choices, feasibility concept and detailed design, through to project and programme management, implementation and operation. Atkins structure of five business segments reflects how we manage the business in different geographies and markets. Details of activities and results by business segment are shown in the segmental performance section which follows. Key performance indicators The Group uses a range of performance measures to monitor and manage the business. Those that are particularly important in monitoring our progress in generating shareholder value are considered key performance indicators (KPIs). Our KPIs measure past performance and also provide information and context to anticipate future events and, in conjunction with our detailed knowledge and experience of the segments in which we operate, allow us to act early and manage the business going forward. We track safety, volume, staff turnover, profitability, efficiency, secured workload and capacity.

21 Strategic Report 19 Business Review continued Revenue, operating profit and margin, earnings per share (EPS) and operating cash flow provide indications as to the volume and quality of work we have done. They measure both profitability and the efficiency with which we have turned operating profits into cash. Work in hand measures our secured workload as a percentage of the budgeted revenue for the next year. Staff numbers and staff turnover are measures of capacity and show us how effective we have been in recruiting and retaining our key resource. Safety in the workplace and on our project sites is paramount and forms part of our commitment to quality and reliability and, as such, we track the accident incident rate (AIR) across the Group. The AIR is an industry measure of the number of reportable accidents per 100,000 staff and is explained in more detail in the Corporate Sustainability Review on page 54. As a people business staff turnover is an important metric for us and shows the rate at which staff choose to leave the business. KPIs for the year ended 31 March are shown (page 20), along with prior year comparatives. Review of the year As outlined in the Chief Executive Officer s Statement and in more detail in the Financial Performance Review (page 41), this has been another good year in terms of Atkins financial performance. Revenue improved by 2.6% to 1.75bn (: 1.71bn). Reported profit before tax was 114.2m ( restated 1 : 98.0m). A more representative measure is underlying profit before tax, which was 106.4m ( restated 1 : 99.2m). Underlying profit excludes profits on disposals and costs associated with disposals of 10.5m (: 4.5m), amortisation of acquired intangible assets of 2.7m (: 10.0m), together with one-off pension gains in the comparative figures of 4.3m arising as we continue to actively manage our pension liabilities. Reported operating profit was 113.7m ( restated 1 : 104.0m), at a margin of 6.5% (: 6.1%). As we state above, we believe a more representative measure of operating profit adds back amortisation of acquired intangible assets of 2.7m (: 10.0m), together with one-off pension gains in the comparative figures of 4.3m. This shows a more representative underlying operating profit of 116.4m ( restated 1 : 109.7m) giving an improved underlying margin of 6.7% (: 6.4%). The aforementioned profit on disposal of 10.5m is explained in more detail in note 8 to the Financial Statements (page 143) and comprises the net profit on sale of our UK highway services operations and the disposal of the Peter Brown construction management at risk business in North America, which follow on from the sale of our UK asset management business and the disposal of our non-controlling interest in the RMPA (Colchester Garrison) private finance initiative in prior years. Headcount closed the year at 17,489 (: 17,899), reflecting both the sale of non-core businesses totalling 1,165 and underlying headcount growth and the acquisition of Confluence. Underlying diluted EPS increased by 3.1p per share to 85.7p ( restated 1 : 82.6p), an increase of 3.8%. The Group pension schemes have a net liability of 324.2m, an increase year on year of 42.2m following the adoption and retrospective application of IAS 19 (revised 2011). The fair value of plan assets has increased to 1,236.3m (: 1,209.2m) and the liabilities have increased to 1,560.5m ( restated: 1,491.2m). Operating cash flow in the year was 95.5m (: 82.9m), representing 82.0% (: 75.5%) of underlying operating profit. The Group s liquidity remains strong with closing net funds of 188.3m (: 143.0m). As at 31 March, the Group had secured 51% (: 55%) of budgeted revenue for the coming financial year. This excludes in both periods the future workload of the UK highways services business, which was sold in the year. A segmental analysis follows (starting on page 21) that explains more fully each of our segments. We outline their financial performance in the period, their strategy and business model and external factors driving their business together with specific risks relating to the segment. We have also provided information on their performance in relation to safety, sustainability and staff-related matters. Corporate Information Financial Statements Strategic Report 1 The results for the year to 31 March have been restated to reflect changes to accounting standards with regards to the treatment of pension costs (IAS 19 (revised 2011)).

22 20 Strategic Report Business Review continued Key performance indicators Note Restated 1 Change Financial metrics Revenue 2 1,750.1m 1,705.2m +2.6% Operating profit 113.7m 104.0m +9.3% Underlying operating profit m 109.7m +6.1% Operating margin 6.5% 6.1% +0.4pp Underlying operating margin 3 6.7% 6.4% +0.3pp Underlying profit before tax m 99.2m +7.3% Operating cash flow 95.5m 82.9m +15.2% Underlying diluted EPS p 82.6p +3.8% Work in hand 6 51% 55% -4pp Safety Accident Incident Rate (AIR) People Staff numbers 31 March 8 17,489 17, % Average staff numbers for year 17,565 17, % Staff turnover % 10.6% +0.7pp Notes: 1. The results for the year to 31 March have been restated to reflect changes to accounting standards with regards to the treatment of pension costs (IAS 19 (revised 2011)). 2. Revenue excludes the Group s share of revenue from joint ventures. 3. Underlying operating profit excludes amortisation of intangibles recognised on acquisitions of 2.7m. In the comparative year, it excludes amortisation and impairment of intangibles recognised on acquisition of 10.0m along with a pension curtailment gain of 4.3m. 4. Underlying profit before tax additionally excludes net profit on disposal of businesses of 10.5m (: 4.5m). 5. Underlying diluted EPS is based on underlying profit after tax and allows for the dilutive effect of share options. 6. Work in hand is the value of contracted and committed work as at 31 March that is scheduled for the following financial year, expressed as a percentage of budgeted revenue for the year. The comparative figure excludes the UK highways services business, the disposal of which was completed in October. 7. Accident incident rate (AIR) tracks the number of reportable accidents per 100,000 staff. 8. Staff numbers are shown on a full time equivalent basis, including agency staff. 9. Staff turnover is the number of voluntary staff resignations in the year, expressed as a percentage of average staff numbers. Revenue by sector Revenue by client type Revenue by segment Roads 21% Rail (including mass transit) 20% Energy 13% Water and environment 9% Defence and security 8% Buildings 6% Aerospace and aviation 6% Urban development 6% Education 3% Other 8% Public sector: local government 24% Public sector: national government 19% Regulated 19% Private sector 38% UK and Europe 55% North America 21% Middle East 9% Asia Pacific 6% Energy 9%

23 Segmental performance Strategic Report 21 United Kingdom and Europe Good growth in our core markets. > Key performance indicators Change Financial metrics Revenue 998.3m 977.1m +2.2% Operating profit 62.6m 62.2m +0.6% Operating margin 6.3% 6.4% -0.1pp Work in hand % 50.9% -1.7pp Safety Accident Incident Rate People Staff numbers at 31 March 9,544 10, % Average staff numbers for the year 9,751 9, % Staff turnover 9.5% 8.8% +0.7pp 1. Work in hand adjusted in for the removal of highways services for comparability. Revenue +2% Operating profit +1% Average staff numbers -2% 1,053.6 Strategic Report 1, ,690 10,896 10,047 9,913 9, Revenue by sector Revenue by client type Financial Statements Rail (including mass transit) 32% Roads 19% Defence and security 13% Water and environment 8% Aerospace and aviation 8% Education 5% Urban development 3% Buildings 3% Other 9% Public sector: local government 18% Public sector: national government 25% Regulated 25% Private sector 32% Corporate Information

24 22 Strategic Report Segmental performance continued United Kingdom and Europe Performance Our United Kingdom and Europe business has performed well during the year. Headline revenue has increased by 2.2% despite the disposal of our UK highways services business at the half year. On an underlying basis for continuing activities revenue increased by 15%, driven primarily by the UK where we have seen good momentum in our core markets, which continue to be well-funded. Margins at 6.3% (: 6.4%) are slightly lower but have progressed across most of the business. This year s performance was held back by our conservative approach to profit recognition with regards to outstanding contract variations on a number of longer term rail projects in the UK and a strong European prior year comparative as a consequence of a profit release. We have made good progress with the Group s strategy of portfolio optimisation and were pleased to complete the sale of our UK highways services business to Skanska on 4 October for an initial cash consideration of 16m, together with a further 2m subject to the future performance of the business. The profit on the disposal of this business was 13.0m, which is accounted for in the Group s profit before tax but not reported in the tables above. Staff numbers at the end of March were 9,544, a reduction of 590 on the same time last year. On an underlying basis, excluding the 1,128 staff who transferred as part of the UK highways services sale in the period, headcount was up 6% in the year. Business model We are primarily focused on the UK and European markets where we plan, design and enable our clients capital programmes and projects in and around infrastructure, as well as providing engineering consultancy services to wider markets. We are a technical consultancy, providing advice, design and engineering together with project management skills for public and private sector clients. Our multidisciplinary skills allow us to draw on expertise across the business to deliver complex projects in the UK and Europe, and to support our other regional businesses with specialist expertise. Strategy Our UK and European strategy focuses on maintaining our market leadership positions and maximising revenue opportunities, taking advantage of the UK Government s commitment to stimulate the economy through infrastructure investment and from regulatory spend in rail, utilities and airports. Our defence, security and aerospace markets provide good diversity to our infrastructure exposure. Operational excellence continues to improve the underlying processes of the business, ensuring increased time to focus on our clients needs, improving project delivery and driving business efficiency. Our ability to leverage skills and capability from a variety of industry sectors and professional disciplines provides a strong selling proposition to our clients. We see multiple opportunities for our broad multidisciplinary offering, providing good growth potential. Business drivers The economic environment significantly affects the opportunities available to our business and the UK Government s recognition of infrastructure as a core enabler of growth provides a positive stimulus. Our diversified portfolio provides resilience to market fluctuations, as does the fact that a number of our markets remain well-funded. The Scandinavian markets that we face continue to benefit from investment in infrastructure from the public and private sectors, providing stable, well-funded, market conditions. Added resilience is brought to our UK business by its ongoing support of projects in other regions, together with the increasing use of our global design centres in Bangalore and Delhi, which provide flexibility of delivery and access to high-quality, lower cost resources. Our market leadership position in the UK is underpinned by the technical excellence of our people and the quality of their work. This has been recognised by a number of awards in the year, including being named the New Civil Engineer/Association for Consultancy and Engineering UK Major Consultant of the Year and the winner of the best change management project in the Management Consultancy Awards, in partnership with Network Rail, for the Level Crossing Improvement Programme. People Excluding the staff who transferred from Atkins with the sale of the UK highways services business, the United Kingdom and Europe business experienced positive headcount growth. Staff turnover increased slightly to 9.5% from 8.8%. A combination of improving market conditions, the need to recruit highly specialist skills and a large and diverse number of competitors for designers, engineers and project managers across the region resulted in a number of programmes being implemented to assist with the attraction, engagement and retention of talented people.

25 Strategic Report 23 Segmental performance continued United Kingdom and Europe Reputation also plays a vital role in recruitment and retention and over the last year Atkins has been recognised by a number of independent organisations as a great place to work. In the Sunday Times 25 Best Big Companies to Work For we moved from 23rd to 18th and appeared in the top 25 for the eighth time in 10 years. We continue to be one of the biggest and most popular recruiters of newly graduated engineers and were again voted the TARGETjobs most popular graduate recruiter in the construction, civil engineering and surveying sector. During more than 400 young people joined the UK business on formal education and development programmes. This was one of our largest ever intakes and included more than 90 apprentices. In, Atkins became a founder member of the 5% Club. As a member we have committed to having a minimum of 5% of our overall UK headcount on a formalised apprentice, sponsored student or graduate programme. As of 31 March, we had achieved 12.5%. We continue to work to increase the proportion of female staff in Atkins and have developed a range of flexible working options to help us both recruit and retain a broader range of staff. Our efforts were recognised by workingmums. co.uk when it announced Atkins as winner of its Overall Top Employer and Innovation in Flexible Working awards. In line with the rest of the Group, we measure employee engagement through our Viewpoint employee engagement survey. We have established a regional target of improving our regional engagement score by two points on a year on year basis and were encouraged that in the UK our results in showed an increase of five points over the previous year. Safety and sustainability Workplace health, safety and wellbeing continue to be a high priority. Although the overall accident incident rate remains largely static, there were encouraging improvements on the engineering and contractor indicators. In the UK, we were pleased to be awarded a Royal Society for the Prevention of Accidents Gold Award for Occupational Health and Safety for the third consecutive year. As a founding member of the Consultants Health and Safety Forum, during the year we have been involved in developing an online training package that integrates risk assessment early in the design process to encourage good practice. The ongoing promotion of science, technology, engineering and mathematics (STEM) careers to young people continues to be a focus. The UK business created eight STEM hubs nationwide to enable a more coordinated approach to STEM activity with schools, colleges and community groups. We currently have more than 200 STEM ambassadors actively engaged in this programme. To encourage our people to contribute further to the social, environmental and economic health of our communities we have formalised a volunteering policy commitment in the UK. These volunteer days have mainly been used to support charity organisations like RedR and Engineers without Borders. Risk The majority of the Group s postemployment benefit liability sits within the UK business and is comprised of defined benefit pension obligations, the largest of which is within the Atkins Pension Plan, which is closed to the future accrual of benefits (see note 32 on page 161). The pension obligations are recognised as a risk due to their size and the fact that the ongoing liability is a function of a number of assumptions, not least the life expectancy of members. This risk is mitigated by ongoing cash contributions to the pension fund, which have been agreed with the pension trustees, along with measures to actively manage ongoing volatility. To assist in managing our project portfolio we continue to cascade a project management competency framework across the region. The implementation of this initiative, including the associated training, will assist in developing project management capabilities within the region. We identify, review and assess risks across all of our businesses and the process is explained in more detail in the Principal Risks and Uncertainties section of the Group s Annual Report and Accounts (page 44). Outlook The outlook for our UK and European business as a whole is stable despite a slowdown in our aerospace business. In the UK the infrastructure markets present opportunities for our broad multidisciplinary offering as the UK Government further stimulates the economy with its commitment to infrastructure spend. Our secured work in hand of 49.9% (: 52.3%) of next year s budgeted revenue gives us confidence for the year ahead. The core Scandinavian rail and highways markets remain well-funded, with a visible pipeline of new projects, supported by government commitments. Work in hand in Europe improved in the year to 42.3% (: 38.9%). Corporate Information Financial Statements Strategic Report

26 24 Strategic Report Segmental performance continued United Kingdom and Europe United Kingdom Key performance indicators Change Financial metrics Revenue 922.0m 900.3m +2.4% Operating profit 58.1m 56.5m +2.8% Operating margin 6.3% 6.3% nm Work in hand % 52.3% -2.4pp People Staff numbers at 31 March 8,810 9, % Average staff numbers for the year 9,017 9, % Staff turnover 9.5% 9.0% +0.5pp 1. Work in hand adjusted in for the removal of highways services for comparability. Performance The UK business has grown headline revenue by 2.4% despite the sale of our highways services business part way through the year. On an underlying continuing basis, the business delivered a strong performance with revenue growth of 16.7%, supported by underlying headcount growth of 6.8%, excluding highways services. The full year operating margin of 6.3% (: 6.3%) held steady, with a contract gain share as a consequence of our M25 design project exceeding its delivery targets on the initial upgraded sections, in part offset by outstanding variation negotiations on certain longer term rail signalling contracts. Encouragingly, second half margins moved ahead to 7.4% (: 6.6%), partly due to the disposal of the lower margin highways services business and through the ongoing focus on margin across the business. Excluding the highways services contribution for the period of ownership, the margin for the year was 7.0%. Operations Rail Our rail business has had a busy year with high levels of utilisation, reflecting the strong pipeline of projects. Over the course of the year, headcount has grown significantly as a number of major signalling, station design and electrification projects have started. However, the performance of this business has been adversely impacted by negotiations around contract variations on some of our longer term signalling contracts. A focus of this financial year has been on delivering work across a number of signalling projects awarded under the two major frameworks for the Sussex/ Wessex and Kent/Anglia areas, including Farnham and East Sussex. During the year, we secured further work through these frameworks, including a major re-signalling project in East Kent. This is in addition to ongoing work on our other non-framework signalling contracts at Cardiff and Wolverhampton. The UK s electrification programme presents a substantial opportunity for our rail business. In partnership with Parsons Brinckerhoff, we are the lead design organisation for the electrification of the Great Western main line between London and South Wales. In partnership with Network Rail, Laing O Rourke and VolkerRail, we are jointly delivering the Stafford Area Improvement Programme. During the year we have also continued to support the delivery of a number of other technically challenging projects for Network Rail, including the transformation of Birmingham New Street station and design work for the East West Rail project, which aims to connect East Anglia with central, southern and western England. The rail business has been involved in early stage design for phase one of High Speed 2 (HS2), between London and the West Midlands, including civils design and environmental work, and we believe we are well placed to win further opportunities on phase two. Our rail business won six industry awards during, including: Best Practice Award for the Thameslink Borough Viaduct at the British Construction Industry Awards; Project of the Year for Nuneaton North Chord at the Rail Freight Group Awards; and the Innovation Award for East Kent Access Phase Two at the Institute of Civil Engineers (ICE) Engineering Excellence Awards.

27 Strategic Report 25 Segmental performance continued United Kingdom and Europe Our rail business had a strong work in hand position as we entered the new financial year, reflecting the continued strong pipeline. Highways and transportation Following the disposal of our highways services business, we have refocused the highways and transportation business on three core areas: strategic advice, design consultancy and asset management. In addition, we continue to provide operational maintenance and design for the M25, London s orbital motorway, as part of our role within the M25 Connect Plus consortium. During the year, we received a contract gain share payment as a consequence of our M25 design project exceeding its delivery targets on the initial upgraded sections. We have healthy workloads, supported by the UK Government s Spending Review and Autumn Statement, which indicate a significant increase in infrastructure spend through to 2020/21, including major new roads schemes in England, Scotland and Wales. We have secured a number of projects for which funding was committed through this process, including work on the M54/M6 junction, the A27 Chichester bypass and schemes as part of the Highways Agency s Smart Motorways programme. The year has seen significant activity in the Smart Motorways sector, with the completion of major schemes on the M62 in Manchester and at the M4/M5 interchange near Bristol, as well as the recent opening of the Atkins-designed first section of all-lane running on the M25. We have recently secured the M1 junction 19 to 16 contract and there is a robust pipeline of further schemes that will come to the market in the year ahead. Our multidisciplinary consultancy services teams have continued to deliver well with strong revenue growth in Wiltshire, supported by further wins in the West Midlands and more recently in Hampshire. These long-term contracts, covering a wide range of services from transport planning and asset management to engineering design, are also set to benefit from additional capital funding over the next five years. Looking ahead, the Highways Agency will undergo a major change as it looks set to become a government-owned company by April We expect to see a three-fold increase in its annual expenditure to more than 3.0bn per annum by 2020 procured through a new collaborative delivery framework. We have prequalified for this key opportunity, with final awards onto the framework expected to be made in autumn. Water and environment Our water and environment business has undertaken significant work on key projects during the year, including Crossrail and High Speed 2 and the peak of delivery for the water industry in the Asset Management Plan 5 (AMP5) investment cycle. Our five-year regulatory AMP5 framework contracts with a number of the UK s water companies have continued to provide good workload volumes as capital investment programmes progress. It has been encouraging to see the water industry developing its delivery models well in advance of the start of AMP6 in April 2015 and we have been successful in securing key places on the AMP6 frameworks with Thames Water and Severn Trent Water. We are bidding for similar collaborative opportunities with other water companies which should provide further continuity of workload between future AMP cycles. Atkins, alongside partners Boskalis Westminster Ltd and VolkerStevin Group (the VBA consortium), is one of six asset delivery partners to secure a place on the Environment Agency s 1bn Water and Environment Management (WEM) framework, which will run until late This will focus on reducing the risk of river and coastal flooding, as well as securing social and environmental improvements. As a result of our focus on working with international funding and development organisations, Atkins has won a contract to lead a pan-european consortium to develop sustainable energy solutions for 24 countries in eastern and southern Africa, and is a consortium partner in another contract covering a further 26 countries in western and central Africa. These two contracts are part of the Sustainable Energy for All (SE4ALL) framework which is a multi-stakeholder partnership between governments, the private sector and civil society. Faithful+Gould Our UK Faithful+Gould business saw good growth in the year, with steady workloads through the Scape public sector procurement framework and continued growth in the energy sector. We are also seeing signs of improvement in the property sector with London and the south east leading the way, evidenced by recent wins for Development Securities and Argent. The market for project management and commercial services remains competitive, although we are optimistic about improvement as the sector emerges from recession. Corporate Information Financial Statements Strategic Report

28 26 Strategic Report Segmental performance continued United Kingdom and Europe Design and engineering Our design and engineering business serves customers across five key segments: education, airports, defence, transportation and mixed use development. All sectors have strong pipelines of secured workloads and opportunities. In the education sector, the Priority Schools and Academies programmes continue to gain momentum, and we are well placed to participate in these significant opportunities, with a particular focus on buildings and related infrastructure. Our airports team continues to win and deliver significant programmes of work at both London Gatwick and Heathrow. We have been appointed by Gatwick Airport Limited to provide multidisciplinary design services as part of a continued investment programme to transform the airport. At Heathrow, we have been appointed as programme designer for the asset management and replacement programme for the Q6 investment period. In energy, we have secured a number of key projects to support initial infrastructure work around nuclear new build in the UK, in addition to significant work to support nuclear decommissioning projects. Defence, aerospace and communications Our defence, aerospace and communications business continues to provide good diversity to our infrastructure exposure, with access to a number of exciting growth opportunities. In defence we continue to be actively engaged in opportunities to assist in the transformation of Defence Equipment and Support, which is part of the UK Ministry of Defence. We have experienced a recent slowdown in our aerospace business as our major client, Airbus Group, has moved from design to production on a number of programmes. Our communications business continues to provide expertise to a number of key clients where our broad-based design and implementation capability sits neatly alongside our infrastructure business streams. Management consulting Our management consulting business provides the UK Government and industry with practical capability to run the full lifecycle of information technology enabled change programmes. We continue to deliver security work for central government, as well as supporting Heathrow Airport s IT outsourcing contract in partnership with Capgemini, leveraging our position in aviation. Our capability in holistic security continued to grow. This team has secured a range of new projects including a significant assignment in cyber security for a high profile multinational client in the energy sector.

29 Strategic Report 27 Segmental performance continued United Kingdom and Europe Europe Key performance indicators Change Financial metrics Revenue 76.3m 76.8m -0.7% Operating profit 4.5m 5.7m -21.1% Operating margin 5.9% 7.4% -1.5pp Work in hand 42.3% 38.9% +3.4pp People Staff numbers at 31 March % Average staff numbers for the year % Staff turnover 9.7% 6.8% +2.9pp Strategic Report Performance Our European business is primarily focused on the rail and highways infrastructure markets in Scandinavia, with smaller operations in Poland, Ireland and Portugal. Our performance was in line with our expectations with revenue at 76.3m, which was broadly flat compared with the prior year and with margins down against strong prior year comparatives, which were buoyed by provision releases. This margin reduction is also reflective of an increasingly competitive market in Scandinavia. Headcount was down slightly to 734 (: 760). Operations In Denmark, we continue to work across a number of key rail and road infrastructure projects, including the new railway line between Copenhagen and Ringsted and the European Rail Traffic Management System signalling programme. We have maintained a strong order book through the year, securing new projects such as the Hundige-Køge rail renewal project and bridge design on the Copenhagen to Ringsted line. The Danish Government has recently announced a major programme of investment in rail infrastructure and rolling stock, and we believe we are well-positioned to benefit. In Sweden, we are working on a number of significant infrastructure projects, such as the Lidingö Tram Line for Stockholm County Council and the Mälarbanan rail systems project for the state transport authority, Trafikverket. We have secured further projects in the period, including a Kil to Laxa rail project. The market outlook and medium-term pipeline remain good. We continue to work to expand our position in the Norwegian infrastructure market, which is expected to return to growth over the next few years, and we are developing a number of opportunities within rail, metro and light rail. In Poland, we remain focused on the transportation (road and rail), environmental and energy sectors where our largest project continues to be our role as the owner s engineer for the Polish liquefied natural gas plant. Increased market activity is expected in the future, as EU funding is unlocked for new capital schemes. Our operations have stabilised in Ireland and showed some modest growth through the year with headcount increasing for the first time since 2008 on the back of some good wins in the water and highways sectors. In Portugal, the continuing difficult economic conditions will curtail any meaningful growth in the medium term. Financial Statements Corporate Information

30 28 Strategic Report Segmental performance continued North America Margin progression and streamlined organisation structure. > Key performance indicators Change Financial metrics Revenue 380.9m 389.7m -2.3% Operating profit 19.1m 15.3m +24.8% Operating margin 5.0% 3.9% +1.1pp Work in hand 58.8% 61.0% -2.2pp Safety Accident Incident Rate People Staff numbers at 31 March 2,836 3, % Average staff numbers for the year 2,970 3, % Staff turnover 11.5% 10.1% +1.4pp Revenue -2% Operating profit +25% Average staff numbers -4% ,858 3,314 3,091 2, Revenue by sector Revenue by client type Roads 41% Water and environment 17% Buildings 6% Aerospace and aviation 5% Urban development 5% Defence and security 2% Other 24% Public sector: local government 56% Public sector: national government 9% Private sector 35%

31 Strategic Report 29 Segmental performance continued North America Performance Our North American business has seen a 24.8% increase in operating profit over last year, increasing profit to 19.1m (: 15.3m) at an improved margin of 5.0%, up from 3.9% in the prior year. We have made good progress with the portfolio optimisation part of our strategy, with the divestment of the Peter Brown construction management at risk business on 30 August. Excluding the results of the Peter Brown business, which reported a trading loss for the year of 3.2m, gives a combined consultancy and Faithful+Gould operating profit of 22.3m (: 21.8m), at a margin of 6.0% (: 6.0%). The disposal of Peter Brown resulted in a loss on sale of 3.1m, which is adjusted for in calculating the Group underlying profit before tax and is not reported in the preceding table (page 28). Average staff numbers have fallen by 121 since last year, partly as a consequence of the disposal of the Peter Brown business, which accounted for 37 staff, and partly due to restructuring. Our operational excellence programme has been rolled out during this financial year, with an initial focus on increasing margins through both reductions in our overhead cost base and improving staff utilisation. Business model Our transportation, infrastructure and environmental businesses have been reorganised to focus on multidisciplinary design and engineering consultancy services in five client-facing areas: transportation, public and private, federal, aviation and strategic ventures, which includes areas such as rail, energy, technology and future-proofing cities. In order to compete effectively in these markets we have adopted a new operating model comprising a technical professional organisation creating discipline-focused technical resources. These technical resources will service the new client-facing business units, which are supported by dedicated client-focused business development and sales teams. This simplified operating structure will enable us to focus business development and sales on our chosen clients as we progress to larger, more complex projects. Strategy Our strategy is to focus on major infrastructure programmes in the transportation, energy, federal, state and cities markets in North America. As part of the overall Group strategy pillar of portfolio optimisation we disposed of the Peter Brown business during the year, allowing us to focus on our key consultancy and programme management markets. We are strengthening our capability to compete for, win and deliver major projects and programmes, leveraging our technology capabilities to create a competitive advantage. We are shifting our focus to capturing and winning work, and have created a flexible and scalable technical professional organisation to deliver work more efficiently. We aim to improve margins by streamlining our organisation and removing overhead costs as part of our operational excellence programme. Business drivers The majority of North America s projects are funded in part or in whole by federal funds, either through a state or local government agency or directly by federal agencies. Publicly funded projects provide greater stability than privately funded projects, which tend to have funding fluctuations. However, publicly funded projects tend to be awarded more slowly or are delayed due to protracted negotiations within the agencies and/or due to political scrutiny. Operations Our transportation business has continued its positive performance. During the year we were appointed to three new contracts to oversee transport solutions for highways authorities in Florida, Georgia and Texas. Additionally, we were awarded work by the Colorado Department of Transportation to provide general tolling advisory services. Our public and private portfolio has benefited from awards in the wastewater management, energy, marine, and emergency response areas of our business. This includes our appointment to a five-year Texas Multiple Award Schedule contract which gives us access to more than 2,000 potential government-related clients throughout Texas and builds on more than 40 years of delivering quality services throughout the state. In aviation, we were awarded a general services contract at Hartsfield-Jackson Atlanta International Airport, through our Absolute joint venture, comprising Atkins, Southeastern Engineering, Inc. and Brindley Pieters and Associates. Despite generally slow Federal Government business and a government shutdown in October, we were still awarded some notable contracts, the largest of these being the reappointment to the Federal Emergency Management Agency (FEMA) flood risk MAP framework contract and the FEMA Nationwide Housing Inspection Services contract (in joint venture with The Louis Berger Group, Inc. and Tidal Basin Government Consulting, LLC). We also extended our rapid response contract with the U.S. Army Corps of Engineers. We continue to provide key planning, design and engineering services for the United States Military Academy at West Point. Corporate Information Financial Statements Strategic Report

32 30 Strategic Report Segmental performance continued North America Our Faithful+Gould business had a good year with an improvement in margins and profitability. We benefited from the continued economic recovery in the private sector, most notably manufacturing. Additionally, in the hospitality and leisure sector we have made good progress and were successfully appointed to provide project management services on a series of upgrades to the iconic Billie Jean King National Tennis Center in Queens, New York. We continue to see growth in the energy sector, as evidenced by the renewal of our commission with Ontario Power Generation Inc. for a further three years. People To support our operational excellence strategy we restructured our business, delivering efficiencies and an associated headcount reduction of around 6.7%. Staff turnover increased slightly in the year, although it still remains in line with the North America industry average. We remain focused on the engagement and retention of key staff and measure employee engagement through our Group wide Viewpoint employee engagement survey. The overall score remains in line with the benchmarks for our industry sector. We continue to balance the need to offer market-competitive reward structures against our financial performance and affordability. The implementation of My Career, our new Group wide online performance management system, is expected to improve the quality of our performance management activities and create greater alignment between performance and rewards. Safety and sustainability We have a strong safety ethos and culture led from the top of our organisation. Our Faithful+Gould business has promoted physical health in offices, introducing some agile workspaces which provide an option for employees to work standing up. Spending more time standing has well documented ergonomic and cardiovascular benefits and promotes increased physical movement at work. In addition we have introduced a comprehensive heat stress index, supported by controls, which uses temperature and humidity to estimate risks to workers from environmental heat sources. As part of ongoing driver fitness assessment the driving history of our people has been reviewed and supplementary driver safety training provided where required. This year s recipients of support from our Atkins Foundation included a high school robotics design team, an initiative challenging middle school students to design and build table top scale models of future cities using recycled materials, and the American Red Cross in its Oklahoma tornado disaster relief efforts. The current year accident incident rate figure, although higher than the prior year, represents three accidents, two minor slips and trips and one road traffic accident, an increase of one accident year on year. Risk The assessment of risks across all our businesses is explained in more detail in the Principal Risks and Uncertainties section of the Annual Report and Accounts (page 44). There have been no significant developments with regard to the longstanding and previously reported Department of Justice and Securities and Exchange Commission enquiries relating to potential Foreign Corrupt Practices Act violations by The PBSJ Corporation prior to its acquisition by the Group. Outlook We continue to see stable market conditions in the key states within which we operate. Economic conditions in certain states, such as Texas and Colorado, remain positive, and coupled with increased interest in private investments in public infrastructure at state level there are positive investment signals in the market. Work in hand at 31 March stands at 58.8% of next year s budgeted revenue (: 61.0%). Moving into the new financial year our revised structure and continued focus on our cost base provide a strong platform for progress.

33 Strategic Report 31 Segmental performance continued Middle East Middle East Our focused approach delivers improved margins. > Key performance indicators Change Financial metrics Revenue 168.4m 162.2m +3.8% Operating profit 14.4m 11.8m +22.0% Operating margin 8.6% 7.3% +1.3pp Work in hand 62.7% 80.2% -17.5pp Safety Accident Incident Rate People Staff numbers at 31 March 2,071 1, % Average staff numbers for the year 1,985 2, % Staff turnover 16.0% 13.2% +2.8pp Strategic Report Revenue +4% Operating profit +22% Average staff numbers -1% ,154 1,629 1,758 2,006 1, Revenue by sector Revenue by client type Revenue by geography Financial Statements Urban development 22% Roads 18% Buildings commercial/residential 18% Rail (including mass transit) 12% Aerospace and aviation 6% Other 24% Public sector: local government 11% Public sector: national government 38% Private sector 51% Qatar 36% Kingdom of Saudi Arabia 18% Abu Dhabi 16% Dubai 12% Sultanate of Oman 7% Bahrain 1% Other 10% Corporate Information

34 32 Strategic Report Segmental performance continued Middle East Performance The Middle East region had an improved year with revenue up 3.8% to 168.4m (: 162.2m) and operating profit 22% ahead of last year, reflecting a strong second half performance, with significant wins in the rail sector and encouraging signs of a re-emergence of growth in the United Arab Emirates (UAE) property sector offsetting restructuring costs and delays to project mobilisation during the first half of the financial year. Notwithstanding this improved performance, we continue to experience protracted negotiations on variations on some of our major contracts in the region. Business model Our business model is to maintain strong local resources in our chosen markets, complemented by multi-skilled design centres both within the region and in India. This provides agility and efficiency by maximising our ability to mobilise for major projects, while minimising exposure to individual market resource demands and constraints. Strategy Our strategy in the Middle East is to focus on the region s most dynamic markets and sectors; namely infrastructure, rail and property in the UAE, Qatar and the Kingdom of Saudi Arabia (KSA). The region offers multiple opportunities and our strategy is aimed at carefully selecting and securing major projects and programmes with established key clients. In addition, local resources support our energy business in the region, which is reported within our Energy segment. Business drivers The economic climate in the Middle East is primarily driven by the global oil price, which affects demand for our services since regional spending ultimately flows through to capital investment in infrastructure, transportation and property. The longer term need to develop in these areas to support growing economies and populations will continue to drive strong demand for our services. We have a clear view of well-funded programmes. Operations Notwithstanding some delays experienced on projects coming to the market in the first half of this financial year, the business has built upon its well-balanced workload and further cemented its position among the region s foremost design and engineering consultancies. One of our most significant projects in the region is as lead designer for three of the six lines of Riyadh Metro, where we are partnering with the Spanish consultancy TYPSA. Our client is the FAST consortium (comprising FCC, Samsung, Alstom, Strukton and Freyssinet), which is responsible for lines four, five and six, representing just over a third of the total track. This project has further developed our profile in the KSA, building on our ongoing role as lead designer and programme manager for the new 30m passenger per year terminal and associated buildings and infrastructure at King Abdulaziz International Airport in Jeddah. Our current rail projects include Etihad Rail in the UAE, Dubai Tram, UAE, and Doha Metro Red Line South and Lusail Light Rail in Qatar. There remains strong demand for metro projects across the region, with further opportunities to work selectively for design and build contractors within our core markets. Infrastructure sector activity, which covers roads, bridges and utilities networks, remains buoyant in Qatar, where our headcount has grown to approximately 500 locally based staff. We continue to work with the Qatari Government, advising on infrastructure planning and design projects to meet its National Vision Our key projects include the Central Planning Office, which is making an important contribution to the coordination of Qatar s major transport programmes, and a significant framework contract to upgrade Doha s roads and drainage systems. In Abu Dhabi we have a broad portfolio of infrastructure projects with key clients including Abu Dhabi and Al Ain Municipality, the Department of Municipal Affairs, the Urban Planning Council and Musanada. Notable projects include the design of infrastructure for a 1.3bn, 42 km 2 Emirati community in North Wathba. We are also seeing opportunities in the KSA, where we recently won a strategic programme partnering with Bechtel to advise the Economic Cities Authority on the development of four new cities. In addition, we are supporting the Royal Commission of Jubail and Yanbu with its major industrial development activity in the Eastern Province. Our property sector activity is showing early signs of an upturn, particularly in Dubai following the city s successful bid to host Expo 2020, where developers have been restarting suspended projects and initiating new opportunities. Our current key projects include Dubai Opera House and the residential element of Al Habtoor City, a major new development along Sheikh Zayed Road, the city s main arterial highway.

35 Strategic Report 33 Segmental performance continued Middle East Our established presence in Oman is also presenting good opportunities within the property and infrastructure sectors through longstanding clients such as The Wave, Muscat and Omran, as well as Saraya Bandar Jissah, for whom we are providing construction supervision services for the infrastructure works for a 350m residential and leisure development. During the first half of the year we undertook restructuring activity in Kuwait and Bahrain, enabling us to concentrate resources within our priority growth markets. Our Faithful+Gould Middle East business has performed well, supplemented by the addition of the Confluence project management business of 71 staff. We continue to provide project and programme management support across the region. During the year we have seen good growth in both Qatar and the KSA. The acquisition of Confluence brought additional projects with new clients, most notably the University of Dubai and two Kempinski hotels in Oman and Dubai. Our achievements are evidenced by industry awards and recognition, such as our success in being named Consultant of the Year by both Construction Week and Middle East MEP magazines, as well as winning Construction Week Qatar s Health and Safety Initiative of the Year award. People Headcount has grown modestly, up 92 year on year, with 71 staff joining the region as a consequence of the acquisition of Confluence. We also saw the impact of mobilising new contracts offset by reductions in Bahrain and Kuwait where we are reducing our presence. Improved market conditions have also led to greater competition for staff, particularly in key markets such as Qatar and the UAE, with staff turnover increasing to 16% across the region. We measure staff engagement through our Group wide Viewpoint survey. Our overall engagement score for the Middle East region remains significantly better than the benchmark for our industry sector. This is reinforced by the large proportion of staff who indicated in the survey that they are proud to work for Atkins and that they care about the success of the organisation. This is particularly pleasing given the retention challenges that we face in the region. However, we experienced a slight drop in the overall engagement score in the current year and have focused on specific staff engagement activities to address this. Our ability to mobilise existing staff from across the Group and to hire new staff from within and outside the region to resource the delivery of major projects is critical to our business success in the Middle East. Safety and sustainability We are demonstrating strong leadership through the launch of the Atkins minimum requirements for construction safety which establishes a new level of control over our engagement with and influence over clients and contractors on construction supervision projects. It includes health, safety and welfare statutory regulations. The accident incident rate for both the current and prior year relates to single office-related incidents. We have extended our influence around sustainability through the continued funding of the chair and senior lecturer of sustainable design of the built environment at the British University in Dubai. Risk Certain countries within the Middle East have greater potential for political change. In addition, it is a region where there is an increased risk of payment delays. Our extensive experience of operating in the Middle East over the last 40 years gives us a level of insight into the political environment which, combined with our focused strategy of carefully selecting both the countries and clients, enables us to mitigate political and commercial risks as much as possible. Construction safety remains an elevated risk in the Middle East. As explained in our Corporate Sustainability Review (page 54), we are mitigating this risk wherever possible and have been instrumental in creating improved standards for the industry. We track risks across all of our businesses. This process is explained in more detail in the Principal Risks and Uncertainties section of the Group s Annual Report and Accounts (page 44). Outlook We have a good order book which stands at 62.7% of next year s budgeted revenue (: 80.2%). In the next financial year we see good opportunities for growth in our key property, infrastructure and rail sectors in the well-funded markets of Qatar, the UAE and the KSA. Corporate Information Financial Statements Strategic Report

36 34 Strategic Report Segmental performance continued Asia Pacific Good revenue growth as we diversify through acquisition. > Key performance indicators Change Financial metrics Revenue 100.5m 88.0m +14.2% Operating profit 8.0m 8.1m -1.2% Operating margin 8.0% 9.2% -1.2pp Work in hand 49.3% 49.6% -0.3pp Safety Accident Incident Rate People Staff numbers at 31 March 1,498 1, % Average staff numbers for the year 1,357 1, % Staff turnover 16.4% 10.1% +6.3pp Revenue +14% Operating profit -1% Average staff numbers +8% ,158 1,152 1,206 1,260 1, Revenue by sector Revenue by client type Revenue by geography Buildings 21% Urban development 18% Water and environment 15% Rail (including mass transit) 14% Roads 7% Other 25% Public sector: local government 21% Public sector: national government 1% Private sector 78% Hong Kong 48% Mainland China 37% Singapore 8% Australia 3% Other Asia Pacific 4%

37 Strategic Report 35 Segmental performance continued Asia Pacific Performance Our Asia Pacific region saw good growth this financial year in revenue, which was up by 14.2%, and headcount, up 15.7% and closing at 1,498 (: 1,295). This is a consequence of both organic growth, as the business diversifies its technical and geographic base, and the acquisition in October of the Confluence project management business, which has operations in Asia Pacific, the Middle East and India, for a debt-free cash consideration of 8.4m. Our operating margin of 8.0% (: 9.2%) reflects both our continued investment in strategic growth and the integration and transaction costs associated with the Confluence acquisition incurred during the year. Business model In Asia Pacific, we operate through a network of offices in Greater China, Malaysia, Vietnam, Singapore, India and Australia, providing our clients with a range of services throughout the entire cycle of urban development. The acquisition of Confluence has further strengthened our regional capability in project management. We also draw upon our Group wide capability to deliver the most suitable solution to our clients. Strategy We are working to expand our footprint in Asia Pacific to take advantage of the rapid urbanisation opportunities that are emerging. In Hong Kong we have developed a dedicated team to pursue the pipeline of large scale government infrastructure programmes. We continue to focus on broadening our client base, adding prestigious names such as the Airport Authority and West Kowloon Cultural District Authority alongside the Mass Transit Railway Corporation. We also continue to strengthen our relationships with internationally renowned contractors through our design and build projects. In mainland China, we have adopted a multidisciplinary approach to engage the rise of rapid urbanisation and the increasing emphasis on quality. This has provided good opportunities for our planning, architecture and landscape business, while our expertise in economic studies, transport planning and eco-low carbon consultancy positions us well in the market. We are now introducing our engineering services to the market through strategic partnerships with leading local companies to leverage further growth in China. In addition, we see a number of major Chinese companies investing in large scale infrastructure projects internationally and our partnerships with them provide us with significant growth opportunities in other regions. We continue to expand in South East Asia in Malaysia, Vietnam and Singapore as well as India, with a primary focus in urban planning, transport infrastructure and property. We are endeavouring to leverage the strengths and contacts of our existing Atkins and Faithful+Gould businesses with the recently acquired Confluence business in the markets we share. Business drivers Our growth potential in the Asia Pacific region is underpinned by the speed and scale of urbanisation driving both government spending and, to a large extent, the rate of private sector investment. Outside Asia Pacific, we see good business opportunities for the Group as major Chinese companies invest in large scale infrastructure development projects overseas. Operations In Hong Kong, we continue to diversify our key client portfolio and deliver high end engineering services to achieve steady growth. We were recently appointed to undertake project management consultancy services for the West Kowloon Cultural District development in Hong Kong. Securing this major project demonstrates our commitment to growth and diversification in Hong Kong and the Asia Pacific region. We have been commissioned by Dragages Hong Kong Limited (Dragages) as the design consultant for the Liantang/Heung Yuen Wai Boundary Control Point project and associated works. This is our largest design and build contract with Dragages in Hong Kong to date. The commission further enhances our relationship with Dragages and underpins our strategy of working with contractors. We recently celebrated the breaking of ground for our design for the Pearl of the North, the 565 metre super-tall building in Shenyang, which showcases our architecture capability for designing super-tall iconic buildings in the region. We have also completed a plan for the Dongliang River restoration and landscape design, which creates a new ecological leisure destination in Chongqing, China and mitigates existing environmental risks such as flooding and poor water quality. We successfully delivered a masterplan for a new town in Fuzhou, the capital of Fujian Province, which included a large scale industrial park for aviation-related activity, a 10km tunnel and expressway. As a consequence we signed a strategic framework cooperation agreement with AVIC Joy Air Holdings Limited to be involved in the planning of a number of major new developments across China. Corporate Information Financial Statements Strategic Report

38 36 Strategic Report Segmental performance continued Asia Pacific Elsewhere we continue to expand our footprint in South East Asia. Recently we were commissioned by the Ministry of Rural and Regional Development in Malaysia, which is responsible for developing, encouraging, facilitating and fostering economic and social development in the federation, to deliver the concept design for buildings and the masterplan for core and potential extension areas of the Asia Aerospace City Subang in Malaysia. In India, we continue to pursue opportunities in the property, masterplanning and transportation sectors. We work closely with our team in Hong Kong to target selected clients and niche opportunities in the Indian property market and we have been successful in securing two commissions from Wave Group, one of the largest property developers in the Delhi region. In the transportation sector, we have won highway design work for two new townships on the Delhi-Mumbai Industrial Corridor project. Faithful+Gould s integration of the 166 Confluence staff in the region, out of a total of 237, is progressing well. We have had recent success in Singapore on several high-profile projects. A key initiative is to build our profile in our core markets and to expand into new sectors, most notably the industrial and pharmaceutical sectors in India as well as the hotel sector in China. The Confluence acquisition provides a more diverse service and sector portfolio from which to build the next stage of our growth. This is clearly evident in India, where we are involved with Asia s most complex residential project, the showpiece Atmosphere development in Kolkata. The Confluence business also brings with it some distinguished projects, notably the project management of the logistics surrounding the Singapore Formula One Grand Prix circuit. People Our Asia Pacific region experienced good headcount growth in the last year, with an increase of 203, boosted by the Confluence acquisition, as we expand our regional footprint. Staff turnover has increased to 16.4%, reflecting market conditions. Our ability to attract and retain staff is a key area of focus for us this year. Our growth targets in the region have necessitated a focus on recruitment activities. We have invested in this area by implementing the Group wide recruitment tool and a global careers website with specific regional content, to attract more applications and increase the efficiency of the process. We are investing in and developing our human resources infrastructure to support our regional growth plans, and have also invested in technology and personnel to ensure that we are able to support and sustain our next phase of growth. Safety and sustainability The year on year increase in the accident incident rate relates to a single officerelated incident. For the sixth consecutive year, our Hong Kong operation has received Hong Kong s Council of Social Service s Caring Company Award for good corporate citizenship. We mobilised offices across our international operations in response to Typhoon Haiyan, to raise money and support charities coordinating relief efforts, such as RedR. Our Singapore office has achieved Green Services accreditation from the Green Building Council for Environment and Design in recognition of its development of in-house capabilities and corporate green practices, along with the delivery of sustainable designs and services. Risk As we expand our footprint into new territories within the region there is an increased risk associated with operating in these countries. These risks have been identified as lack of commercial transparency, political instability and risks associated with operating within unfamiliar regulatory, tax and employment regimes. We mitigate these risks by undertaking research into both the market and specific clients, as well as using professional advisors to assist with legal and regulatory compliance. Outlook Asia Pacific is well placed to deliver on its strategic growth plan and the acquisition of Confluence strengthens our service offering and geographic reach in the region. Work in hand is consistent with last year at 49.3% (: 49.6%) of next year s budgeted revenue, and the potential in the region is underpinned by the speed and scale of urbanisation in the foreseeable future.

39 Strategic Report 37 Segmental performance continued Energy Strong growth and an attractive pipeline. > Key performance indicators Change Financial metrics Revenue 169.6m 151.9m +11.7% Operating profit 15.1m 13.8m +9.4% Operating margin 8.9% 9.1% -0.2pp Work in hand 31.8% 33.4% -1.6pp Safety Accident Incident Rate 0 0 n/a People Staff numbers at 31 March 1,461 1, % Average staff numbers for the year 1,424 1, % Staff turnover 11.7% 14.3% -2.6pp Strategic Report Revenue +12% Operating profit +9% Average staff numbers +9% ,095 1,307 1, Revenue by sector Revenue by client type Financial Statements Oil and gas 53% Nuclear 34% Power (including renewables) 13% Public sector: national government 1% Regulated 45% Private sector 54% Corporate Information

40 38 Strategic Report Segmental performance continued Energy Performance We continue to deliver good organic growth in our Energy business, where we are well positioned in the buoyant markets of oil and gas and nuclear. We have also seen a steady increase in our share of the conventional generation and renewables markets. We continue to strengthen our service offering through partnerships with companies offering complementary skills, helping us to secure strategic opportunities both within and outside the UK. We will continue to invest in this business to grow organically and through targeted acquisitions. Our Energy business continues to perform well in strong markets across all sectors. Revenue was up 11.7% year on year and staff numbers increased to 1,461, an increase of 6.2% over the year. Growth has been helped by successful partnering arrangements. The margin of 8.9% reflects ongoing investment in large, strategic bids. Business model The Energy business operates worldwide in several home markets, competing against a wide range of service offerings from large multinational engineering consultancies to specialist niche players. Strategy We remain focused on nuclear, oil and gas, conventional power generation and renewables. In these industries we are applying our high end multidisciplinary engineering skills during both design and operational phases to assure the integrity and economic performance of our clients facilities. We continue to look at investment opportunities, selectively expanding our geographic footprint and service offering through organic growth, as well as extending and creating new partnering arrangements and targeting acquisitions. Business drivers Our business is underpinned by the global growth in energy requirements as many countries struggle with increasing demand and an imperative to decarbonise to mitigate the effects of climate change. High oil prices drive the demand to keep existing energy production and distribution facilities operating for longer, drawing on our safety and integrity services. At the same time, with the industry seeking to maximise more challenging oil reserves, such as marginal and deepwater fields, there is a continued increase in demand for our advanced engineering skills. In nuclear we continue to see a similar focus on keeping existing facilities operating safely for longer. There is also continuing demand for technical support around nuclear decommissioning. In addition, we are seeing momentum gather on nuclear new-build programmes around the world as many countries look to develop nuclear power as part of their long-term strategy for energy security and decarbonisation. Our skills are in high demand across the entire nuclear lifecycle. The imperative to decarbonise also increases demand for our skills in the renewables sector. We are helping operators and governments to increase capacity from new forms of low carbon generation such as offshore wind, biomass and energy from waste. Operations Nuclear Our position in the UK nuclear new-build market has strengthened following our appointment to a major new framework with Horizon Nuclear Power to provide engineering and related technical services for a new generation of nuclear power stations in the UK. We remain busy on existing nuclear generation work through our role as an EDF Energy UK strategic supply chain partner. Our recent appointment to provide design, engineering, infrastructure and project management services to URENCO s 540m capital expenditure programme further builds our relationship with this key player within the nuclear fuel supply chain. Our position in the UK s nuclear decommissioning market has been cemented further by our recent appointment as the preferred bidder on a new contract with Sellafield Ltd for its 1.4bn Silos Direct encapsulation Plant (SDP) project, as part of an equal three-way joint venture with Areva and Mace (a.m.a.). The SDP will process nuclear waste recovered from one of the largest high hazard nuclear waste silos on the Sellafield site and is the only project of its kind in the world. This award is testament to the success of our strategic partnerships, which continue to deliver excellent opportunities for the Group. We continue to develop an international nuclear portfolio providing a broad range of services to Emirates Nuclear Energy Corporation in the Middle East on the 20bn Barakah Nuclear Programme, through n.triple.a, our joint venture with French engineering consultancy Assystem. We are also acting as architect engineer, as part of the Engage consortium, on the 15bn International Thermonuclear Experimental Reactor (ITER) programme in the South of France.

41 Strategic Report 39 Segmental performance continued Energy Establishing a nuclear footprint in the US has also been a priority as we await final approvals from the US Government for our acquisition of Nuclear Safety Associates Inc. (NSA), a 130-person engineering and technical services firm with a focus on nuclear safety, design engineering and professional security services. NSA will both enhance the capability of the Group s Energy business and provide it with the opportunity to expand its well-established project and client base in the US. Oil and gas Our oil and gas business continues to focus on securing long-term framework agreements for both consultancy and design services for major oil and gas operators. We continue to expand our ability to provide services on a worldwide scale through our operational hubs and centres of technical excellence in the UK, Middle East, North America and Asia Pacific regions. The most significant win in line with this strategy is our recent five-year global agreement with BP for the provision of engineering design, engineering consultancy and project management services to BP s upstream oil and gas production facilities and assets worldwide. In the year we also secured a two-year framework with major integrated energy company ENI, supporting its portfolio of operating assets in Australia as well as non-operating assets and any future developments. This builds on contracts already established providing a wide range of consultancy services to Maersk, Chevron, Talisman, Apache, Nexen and Statoil in the North Sea and the Gulf of Mexico, as well as our global enterprise framework agreement with Shell. Strengthening of our international oil and gas operations comes with the ENI award above as well as an additional AUD $19m four-year flow assurance contract for the INPEX-operated Ichthys Project, offshore of Western Australia. This builds on our portfolio of projects in the buoyant liquefied natural gas (LNG) market. We have also expanded our technical advisor role on Singapore s LNG terminal supporting its Phase 3 Expansion Project under an engineering services agreement for our full range of capabilities. Our Houston and Calgary operations continue to develop, underpinned by strong client relationships, particularly with BP and Shell. The Middle East market continues to provide a strong pipeline of work, including the recent award of two contracts by Abu Dhabi Marine Operating Company worth over US $3m to support the safe life extension of existing critical infrastructure. Power In the UK our power business continues to maintain a significant portfolio in providing high end technical support to large scale power generation and transmission projects with clients such as National Grid, Drax, Eggborough and Energos. This business has begun to access international markets with the award of a contract providing engineering design services to Tennessee Valley Authority s coal and gas plants as part of our teaming arrangement with Merrick & Co. The contract has been signed for an initial three years with an option to extend for an additional two years. We have delivered technical advisory services on energy storage, geothermal energy and Carbon Capture and Storage (CCS) to the UK Government s Department of Energy and Climate Change, strengthening our position at the heart of emerging clean energy technologies. We continue to act as technical advisor to the CCS commercialisation programme. Marine renewables We have expanded our portfolio of work in the offshore renewables sector with the addition of engineering design contracts to support DONG Energy s extension of the Walney and Burbo Bank offshore wind farms (OWFs) and for the new Race Bank project. Additional contracts with RWE for the Galloper OWF and with Statoil for the Dudgeon OWF further increase our market share of design consultancy work in the offshore renewables sector. People Underlying headcount increased by approximately 6%, underpinning good business performance. During the year we also saw significant investment of time and resource in support of large scale new business opportunities and have focused our recruitment activities to support this work and to achieve our financial targets. Staff turnover has fallen in line with our expectations and reached a three-year low of 11.7%. Retention has been one of the key areas of focus for the Energy business this year. We have continued to focus on ensuring that our reward structure remains competitive and have also invested in a number of development programmes to assist with staff development and retention. Corporate Information Financial Statements Strategic Report

42 40 Strategic Report Segmental performance continued Energy We have extended the delivery of our People Manager Programme, which is aimed at improving the quality of the conversations managers have with their people, and have also introduced a new Energising your Career programme. The programme is designed to help staff at our middle career levels understand their strengths and how to achieve development progression. We have also supported the Group wide implementation of My Career, our new performance and development programme. Safety and sustainability Our nuclear business has achieved good safety performance working as part of the ACKtiv Nuclear joint venture with Carillion and Jacobs. ACKtiv Nuclear s Sellafield project recently exceeded two million man hours without a lost time accident, extending the joint venture s existing record to over three million man hours without a lost time accident. Our AIR was zero for the second year running. We are using our safety expertise to support one of our key clients, providing technical and safety engineering services to Shell s onshore and offshore assets worldwide. Risk We assess risks across all of our businesses. This is explained in more detail in the Principal Risks and Uncertainties section of the Annual Report and Accounts (page 44). The risks identified as being most pertinent to the Energy business are those associated with the safety and environmental and reputational consequences of an error in our work. We have also identified that our plans for growth are potentially affected by the availability of skills. To mitigate this risk we continue to invest in our in-house training academy that now provides a range of externally recognised courses. This year we welcomed just under 500 people on these courses. Outlook The outlook for our Energy business remains very good. We are well positioned in attractive markets and have work in hand broadly consistent with that of last year at 31.8% of budgeted revenue (: 33.4%), which will underpin further growth in the year ahead. Our people have used a variety of platforms to encourage students to consider a career in engineering, including visits by our graduates to school and university events. Through our work in the renewables sector we are helping society to make the transition to a low carbon economy. For example, we are working with DONG Energy Wind Power to extend one of its existing wind farms.

43 Financial Performance Review Strategic Report 41 Performance summary Our underlying profit before tax was 106.4m, an increase of 7.3% over last year s restated profit¹ of 99.2m, on revenue that increased by 2.6% to 1.75bn (: 1.71bn). We believe underlying profit is a more representative measure of performance, removing the items that may give a distorted view of performance. In the current year we have removed profits on disposals and costs associated with disposals of 10.5m (: 4.5m), amortisation of acquired intangible assets of 2.7m (: 10.0m), together with one-off pension gains in the comparative figures of 4.3m arising as we continue to actively manage our pension liabilities. The unadjusted reported profit before tax was 114.2m ( restated¹: 98.0m). Reported operating profit was 113.7m ( restated¹: 104.0m), at a margin of 6.5% (: 6.1%). As we state above, we believe a more representative measure of operating profit adds back amortisation of acquired intangible assets of 2.7m (: 10.0m), together with one-off pension gains in the comparative figures of 4.3m. This shows a more representative underlying operating profit of 116.4m ( restated¹: 109.7m) giving an improved underlying margin of 6.7% (: 6.4%). The aforementioned profit on disposal of 10.5m is explained in more detail in note 8 to the Financial Statements (page 143) and comprises the net profit on sale of our UK highways services operations and the disposal of the Peter Brown construction management at risk business in North America, which follow on from the sale of our UK asset management business and the disposal of our non-controlling interest in the RMPA (Colchester Garrison) private finance initiative in prior years. Headcount closed the year at 17,489 (: 17,899), reflecting both the sale of non-core businesses totalling 1,165 and underlying headcount growth and the acquisition of Confluence. Net finance cost Net finance cost was 13.6m ( restated¹: 14.3m). The year on year reduction was primarily the result of an increase in finance income receivable on loan notes. Taxation The Group s income tax expense for the year was 17.9m ( restated¹: 13.7m), giving an effective tax rate of 15.7% ( restated¹: 14.0%). The Group s underlying effective tax rate was 19.0% ( restated¹: 17.1%). This rate is lower than the UK statutory rate of 23% due to continued benefits from research and development (R&D) tax credits, utilisation of tax losses not previously recognised and the impact of prior year adjustments. The Group s tax position will continue to be driven by our regional profile of profits and the benefit of R&D tax credits. Earnings per share (EPS) Basic EPS from continuing operations was 98.4p ( restated¹: 86.8p). Underlying diluted EPS on continuing operations was 85.7p ( restated¹: 82.6p), an increase of 3.8%. Pensions IAS 19 (revised 2011) valuation and accounting treatment The Group determines pension scheme funding with reference to actuarial valuations. During the year the Group adopted and retrospectively applied IAS 19 (revised 2011). IAS 19 (revised 2011) and the related consequential amendments have had an impact on the 1. The results for the year to 31 March have been restated to reflect changes to accounting standards with regards to the treatment of pension costs (IAS 19 (revised 2011)). reporting of the Group s defined benefit scheme by replacing the interest cost and expected return on plan assets with a net interest charge on the net defined benefit liability. In addition, the standard requires that unvested past service costs and administration costs be recognised immediately in the income statement, which has also had a small impact on the Group s defined benefit liability. The effect of this resulted in the net defined benefit obligation at 31 March being restated as 295.6m (previously 298.8m). As at 31 March the Group s retirement benefit liability was 324.2m ( restated¹: 282.0m). The assumptions used in the IAS 19 (revised 2011) valuation are detailed in note 32 to the Financial Statements (page 161). Funding Cash contributions of 32.0m (: 21.0m) were made to the Atkins Pension Plan (the Plan) during the year. Under the latest agreed recovery plan the Group will contribute 32m to the Plan for each of the two years ending 31 March 2015, with annual contributions then escalating by 2.5% each year until 31 March There were no pension settlement or curtailment gains in but in the comparative period the Plan recognised a net settlement gain of 0.1m in respect of an enhanced transfer value (ETV) exercise for the year ended 31 March. The Railways Pension Scheme recognised a curtailment gain during the financial year in respect of the two new benefit bases that came into effect for certain members from 1 January. The curtailment gain arose for members moving from the existing uncapped salary category or RPI capped salary category to the new CPI capped category. The reduction in the past service liability for this curtailment was 4.3m and this was recognised as a curtailment gain in the year ended 31 March. Corporate Information Financial Statements Strategic Report

44 42 Strategic Report Financial Performance Review continued Charges The total charge to the income statement in respect of defined benefit schemes was 14.3m ( restated¹: 10.5m), comprising service cost of 2.1m ( restated¹: 2.1m), administrative expenses of 0.2m ( restated¹: 0.2m), curtailment and settlement gains of nil (: 4.4m) and a net interest expense of 12.0m ( restated¹: 12.6m). The charge relating to defined contribution schemes increased to 37.9m (: 32.8m). Cash Net funds as at 31 March were 188.3m (: 143.0m), made up as follows: Cash and cash equivalents Loan notes receivable Financial assets at fair value through profit or loss Borrowings due within one year (55.2) (59.8) Borrowings due after more than one year (45.5) (49.3) Finance leases (0.1) (5.3) Net funds Cash generated from continuing operations was 95.5m (: 82.9m), representing 82.0% ( restated¹: 75.6%) of underlying operating profit, and can be summarised as follows: Restated 1 Profit before interest and tax Add depreciation Add amortisation and impairment EBITDA Outflow relating to pensions (32.0) (21.0) Movement in (9.6) (27.0) working capital Movement in long-term payables (0.7) 0.3 Movement in provisions (1.8) (4.7) Other non-cash items (10.4) (5.6) Operating cash flow The movement in non-cash items of 10.4m (: 5.6m) consists primarily of the profit on disposal of the highways services and Peter Brown businesses of 10.5m as well as curtailment and settlement gains in of 4.4m. Net tax paid amounted to 10.9m (: 7.1m). Net capital expenditure in the year, including the purchase of computer software licences, amounted to 16.9m (: 23.9m). Capital structure As at 31 March, the Group had shareholders funds of 130.2m ( restated¹: 146.3m) and the Company had shareholders funds of 186.4m (: 167.7m). The Company had 104.5m fully paid ordinary shares in issue at 31 March (: 104.5m). For further details, refer to note 34 to the Financial Statements (page 171). Treasury policy and objectives The Group s treasury function manages and monitors external funding and investment requirements and financial risks in support of the Group s corporate objectives. The Board reviews and agrees procedures, requirements and authority levels for treasury activities. The Board delegates responsibility of the detailed review of the policies to the Audit Committee. The Group s financial instruments, other than derivatives, comprise borrowings, cash and liquid resources and various items, such as trade receivables and trade payables, which arise directly from its operations. The main purpose of these financial instruments is to finance the Group s activities. The Group also enters into derivative transactions, principally forward foreign currency contracts to manage foreign exchange risk on material commercial transactions undertaken in currencies other than the local functional currency. The main risks arising from the Group s financial instruments are market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group s exposures to and management of each of the main risks, together with sensitivities and risk concentrations, are described in more detail in note 2 to the Financial Statements. The Group funds its ongoing activities through cash generated from its operations and, where necessary, external borrowings and finance leases. The Group s debt facilities are described in note 29 to the Financial Statements (page 159). Utilisation of the Group s facilities is a consequence of prior year acquisitions and ongoing organic growth. As at 31 March the Group had 141.5m of undrawn committed borrowing facilities available (: 113.3m).

45 Strategic Report 43 Financial Performance Review continued There have been no significant changes to the Group s treasury procedures, requirements and authority levels during the year. Critical accounting policies The Group s principal accounting policies are described in note 1 to the Financial Statements (page 119). The Financial Statements for the year ended 31 March have been prepared under International Financial Reporting Standards (IFRSs) as adopted by the EU. 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 date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management s best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. Material estimates applied across the Group s businesses and joint ventures are reviewed to a common standard and adjusted where appropriate to ensure that consistent treatment of similar and related issues that require judgement is achieved upon consolidation. Any revisions to estimates are recognised prospectively. The accounting policies and areas that require the most significant estimates and judgements to be used in the preparation of the Financial Statements are in relation to contract accounting, including recoverability of receivables, goodwill impairment and defined benefit pension schemes. Contract accounting The Group s contract accounting policy is central to how the Group values the work it has carried out in each financial year. This policy requires forecasts to be made on the projected outcomes of projects. These forecasts require assessments and judgements to be made on changes in, for example, work scope, changes in costs and costs to completion. While the assumptions made are based on professional judgements, subsequent events may mean that estimates calculated prove to be inaccurate, with a consequent effect on the reported results. Goodwill impairment As set out in note 1 the Financial Statements (page 119), goodwill is subject to impairment review both annually and when there are indications that the carrying value may not be recoverable. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and fair value less costs to sell. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each CGU or group of CGUs to which the goodwill is allocated represents the lowest level within the entity at which goodwill is monitored for internal management purposes. Determining whether goodwill is impaired requires an estimation of the value in use of CGUs 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. Defined benefit pension schemes Accounting for pensions involves judgement about uncertain events in the future such as inflation, salary levels at retirement, longevity rates, rates of return on plan assets and discount rates. Assumptions in respect of pensions and post-employment benefits are set after consultation with independent qualified actuaries. Management believes the assumptions are appropriate. However, a change in the assumptions used would have an impact on the Group s results and net assets. Any differences between the assumptions and the actual outcome will affect results in future years. An estimate of the sensitivity to changes in key assumptions is disclosed in note 32 to the Financial Statements (page 161). Tax The Group is subject to tax in a number of jurisdictions and judgement is required in determining the Group wide provision for income taxes. The Group provides for potential liabilities in respect of uncertain tax positions where additional tax may become payable in future periods and such provisions are based on management s assessment of exposures. As set out in note 1 to the Financial Statements (pages 119 to 128), 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 profits will arise against which the temporary differences can be utilised. Corporate Information Financial Statements Strategic Report

46 44 Strategic Report Principal risks and uncertainties We recognise that effective risk management is fundamental to helping us achieve our strategic and operational objectives. >

47 Strategic Report 45 Principal risks and uncertainties continued The Group Risk Committee, chaired by the Group chief executive officer, oversees the operation of the Group s risk management framework and provides support to the Board and the Audit Committee. Effective risk management continues to be embedded in our governance framework, which is summarised in the Corporate Report (pages 66 to 73). This risk management framework continues to support the Board s risk appetite when assessing and determining the nature and extent of the significant risks it is willing to accept in achieving its strategic and operational objectives. This framework and the associated risk management structure support the systematic identification, assessment, communication, reporting and management of risk at both strategic and operational levels, and seek to ensure that: the public, employees and the environment are safe from potential hazards inherent in our operations the potential for damage to our corporate reputation, or financial loss to shareholders and other stakeholders, is minimised. The Board believes that, for risk management to be successful, it must integrate the framework into all activities and develop a culture and behaviour within the organisation that ensure: the management of risk is clearly driven from business strategy and objectives Group functions assist and support management in setting minimum standards across the Group the ownership and management of risk is not the exclusive responsibility of senior management but is passed down to appropriate staff members all significant risks have owners, mitigation strategies and, where actions have been identified, action owners who have been assigned a target date by which the action is to be completed operational risks are fully articulated and subject to regular review, communication and reporting across the organisation as part of our normal management process we operate in a culture that encourages early disclosure of issues or concerns, so that timely and appropriate action can be discussed, agreed, assigned and implemented as necessary. It is intended that these principles and the risk management framework continue to be used throughout the Group, without exception, to achieve progressive improvement in the effectiveness of risk management processes. The risk management framework interfaces with the commercial framework, providing an integrated, consistent process for assessing the level of risk for operational projects and services, depending on scale and complexity. This enables appropriate projects and services to be peer reviewed and evaluated, and the risks categorised. Having an integrated process supports management in determining the appropriate level of risk for our operations. It also enables the organisation to identify, evaluate, control, monitor and own risks at the appropriate level, ensuring that: a common approach to risk management is adopted, reducing inefficiency we operate in an environment and culture where both technical and commercial risk remain a key focus. We continue to manage a number of potential risks and uncertainties which could have a material impact on our long-term performance. Many of these risks are common to other companies and we assess them to establish the principal risks for the Group. The table overleaf outlines the principal risks and the mitigating activities we undertake in respect of each of them, and indicates the change of each in the year. We continue to assess these risks under two main categories of strategic risk and operational risk. Where applicable, the table crossreferences principal risks with segmentspecific risks. Corporate Information Financial Statements Strategic Report

48 46 Strategic Report Principal risks and uncertainties continued Strategic Risk (in alphabetical order) Mitigation Mitigating activities in action Change in year Economic outlook Imposition of government austerity measures has an impact on our trading performance as spending on public sector infrastructure is reduced. Worsening economic conditions lead to reduced levels of private sector infrastructure spend and have an adverse impact on our clients ability to pay for our services. Financial The deterioration of the Group s financial position limits our ability to invest in growth. Adverse movements in liability assumptions or asset values result in a significant increase in the Group s defined benefit pension obligations, increasing the cash funding required to repay the deficit and reducing our ability to invest in further growth opportunities. Geo-political Political instability in the regions within which we operate has a negative impact on our ability to deliver contractual services and/or receive payment and/or endangers the safety of our staff. Market Worsening economic conditions lead to changes in contracts resulting in increased risk transfer from clients as competitors accept more onerous contract terms to win work. Reductions in the amount of available work increase pricing pressure and reduce our operating margins. Regulatory/legal Legislation and regulations restrict our ability to operate in certain locations or perform certain activities, leading to the need to exit these markets. Breaches of regulation or legislation result in fines, imprisonment and/or reputational damage. We have increased our sector and geographic diversification to provide resilience at a time when many of our markets still experience uncertainty. We have a clear strategic priority to focus on sectors which have attractive growth prospects with good levels of funding. We actively seek to redeploy staff around the Group to meet demand in growth markets and sectors, frequently moving work to people and people to work. We perform client credit checks and maintain regular management reviews of credit terms, trade debtors and work in progress. We review the Group s trading and funding position on an ongoing basis. We have made good progress in implementing our strategy to continue to de-risk our defined benefit pension schemes. We will continue to manage the assets and liabilities of our pension schemes. The Group s treasury function manages and monitors external funding and investment requirements and risks arising from the Group s financial instruments risks, i.e. market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. We have focused on geographies that have more stable trading environments. We obtain the latest professional risk and security information before engaging in contracts in new geographies and continue to monitor the stability of the markets in which we trade. We have robust, integrated review procedures, which include peer reviews, during the bidding and contracting stage of our projects. We have focused our strategy on sectors with strong growth prospects, good levels of funding and high technical barriers to entry. We have a strategic focus on operational excellence and on winning and delivering work. We seek external advice about new and/or changing trading restrictions, communicating these changes across our business as necessary. We continue to invest in staff training and communication. Risk increasing Risk decreasing No material change to risk We have already reshaped our business to target more than 50% of our revenue outside the UK. Our medium-term goal is to generate more than 75% of revenue from our non-uk and Energy businesses. We continue to focus on funded markets in targeting growth and evaluating investment opportunities. We have added resilience to our UK business through its ongoing support to non-uk projects. During the year we entered into a new five-year revolving credit facility (RCF) of 200m, replacing the Group s previous 150m RCF and 30m bilateral facility. This is in addition to our 2012 debut issue in the US private placement market, which together broaden the sources of funding available to the Group. We continue to monitor and actively manage our strategy to de-risk our defined benefit pension schemes. We also concluded successfully our negotiations on the triennial actuarial funding valuation with the trustee of the Atkins Pension Plan during the year. This resulted in an extension of the associated deficit repayment plan to 31 March Further information is contained in the United Kingdom and Europe review (page 23). Further information is contained in the Middle East review (page 33) and Asia Pacific review (page 36). We are continuing to drive operational performance across the Group to improve our margins. We continue to embed our integrated review procedures across our management and markets. Initiatives such as our operational excellence programme, together with the increasing use of our global design centres in India, aim to deliver a competitive cost base while also supporting and enabling growth across the Group. Work to develop our Group code of conduct continued during the year and this is expected to be launched to all employees in the current financial year. We refreshed the communication of details of our whistleblower hotline Group wide during the year.

49 Strategic Report 47 Principal risks and uncertainties continued Operational Risk (in alphabetical order) Mitigation Mitigating activities in action Change in year Crisis event A significant one-off event affecting a key business location, project or employees could interrupt service delivery, threaten life and/or cause reputational damage to our business. Health, safety and environmental Shortcomings in our design or works supervision result in a health, safety or environmental incident involving staff, clients or other third parties leading to injury, loss of life and/or significant damage to our reputation with all stakeholders. Physical and data security Confidential client business and/or personal data is mishandled, resulting in breach of contract, the inappropriate release of commercially sensitive information or the loss of the personal information of our clients and/or employees. Our business systems suffer an attack from hackers or viruses. The safety and security of our people is threatened. Projects Poor management of projects leads to client dissatisfaction, damage to our reputation for technical excellence and a deterioration in the Group s financial performance. Staff recruitment and retention Failure to attract and retain the most talented, motivated professionals in their respective fields makes us unable to deliver on clients expectations and respond to the most technically challenging and time-critical projects, thereby eroding our market share and damaging our financial performance. Technical delivery Design errors or omissions lead to client dissatisfaction, financial losses and damage to our reputation for technical excellence. We have a Group crisis management plan in place to respond quickly to such events. Safety is part of our commitment to quality and reliability. Clear and explicit senior management leadership on health, safety and environmental matters is regularly reinforced via targeted campaigns. We have implemented our safety standards worldwide. We mandate accident and near-miss reporting and provide a whistleblower hotline to enable staff to raise concerns confidentially. We continue to invest in staff training and communication about the importance of safety and security in the workplace. We use appropriate physical security, secure networks and encryption in order to protect data. We train staff on best practice in information assurance. The Group security officer seeks to ensure best practice and raise the profile of security across the business. We continue to implement our online project management system to drive consistently high standards across the Group. We continue to invest in ongoing project management excellence training programmes for our staff. We continue to improve project controls, which include regular financial reviews of project performance. Regular business reviews evaluate a number of metrics including headcount, retention, vacancy levels and employee engagement. Robust review procedures during the bidding, contracting and delivery stage to ensure that the Group has the capability to deliver the scope of work. Ongoing technical training and development. Appointment of network chairs to provide technical centres of excellence across the Group. Risk increasing Risk decreasing No material change to risk The robustness of our plan continues to be reviewed and tested and the plan is updated as necessary. Our Group wide behavioural awareness programme, Safe and Secure by Choice, continues to support the standard of our commitment to creating a leading health and safety culture. We have developed the Atkins minimum requirements to assess the competency of construction contractors and set the minimum standards expected on site when we supervise works. We refreshed the communication of details of our whistleblower hotline Group wide during the year. We continue to provide information assurance training modules for our people. As part of a more holistic information assurance programme, we have started to develop plans for a behaviours-based programme of engagement with our people on information assurance. We continue to target our investment in increasing project management capabilities across the Group (people, processes and systems). Further information is contained in the United Kingdom and Europe review (page 23). A new online platform, My Career, was rolled out to all regions during the year. This supports a consistent approach to staff performance reviews, training, career planning and development. Engagement is essential in a peoplebased business. We continue to use a variety of channels, including our annual Viewpoint survey, to communicate and engage with our employees. We have developed seven design principles which govern all our technical work. These are now embedded in our business management system. We have set up a working group of representatives from all our operating businesses and relevant corporate functions, which has been tasked with developing and disseminating best practice regarding technical governance. Key areas of focus currently are project manager competence, electronic data management and technical assurance. Corporate Information Financial Statements Strategic Report

50 48 Strategic Report Human Resources Review Individual talent and our collective expertise help us to exceed client expectations and meet our strategic objectives. >

51 Strategic Report 49 Human Resources Review continued We trust our people to go above and beyond. Overview At Atkins we trust our people to go above and beyond for our Company and our clients. Individual talent and our collective expertise help us to exceed client expectations and meet our strategic objectives. Our people are our competitive edge. We assess the impact of our human resource activities on the delivery of our strategy via a structured process of business reviews that evaluate human capital metrics such as headcount, retention and employee engagement. We also forecast future skills and resourcing needs and use this information to manage staff utilisation and to resource our future growth plans. Headcount Underlying headcount increased by approximately 800 people in the year ending 31 March to 17,489, with particularly impressive growth during the first half of the year. There was a rise in the United Kingdom and Europe, Asia Pacific and the Middle East, reflecting our strategy of organic growth and targeted acquisitions. These increases in headcount were partly offset by a reduction in North America as the region continues to focus on operational efficiency and productivity. We remain focused on bringing young people into engineering from school or university. We hired 500 new graduates in across all of our regions and will be targeting a similar number in. There has also been an increase in the percentage of female graduates in this year s intake, which supports our diversity agenda. Our apprentice programme continues to attract school leavers choosing a career in engineering. Further details are provided in the United Kingdom and Europe business review (page 23). To assist with our recruitment activities, we launched an innovative new global careers website to engage potential new recruits which gives access to all our vacancies throughout the world. Figure 1: FTE headcount growth 1 17,600 17,400 17,200 17,000 16,800 16,600 16,400 16,200 In conjunction with developing our talent pool in local markets, we have a growing number of international assignments across the Group, to supplement skills not available locally with specific technical knowledge or to resource the delivery of large projects. In order to respond to the growth in international assignment activity, we have completed a strategic review of our requirements, policies and processes and will be implementing the recommendations from the review over the course of the next financial year. Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Atkins Group 1. Headcount figures are restated to exclude the UK highways services business disposedof in the year ended 31 March. Strategic Report Financial Statements Corporate Information

52 50 Strategic Report Human Resources Review continued We hired 500 new graduates in across all of our regions and will be targeting a similar number in. Engagement Ensuring our employees feel valued and positive at work underpins our ethos and supports our strategy for growth. We know there is always room for improvement, therefore, we ask our people what they think and then involve them in our plans for change. Every year we ask our employees around the world to participate in our Viewpoint employee engagement survey. The survey comprises a series of themed questions of strategic importance to Atkins, aligned to a pre-defined engagement model. This model measures our people s relationship with management, their jobs and the Group. Group results were communicated via the world news centre of our Group wide intranet, with presentations of results by region/business unit arranged locally. The results of the survey showed positive improvements in most areas, with the overall engagement score increasing to 69 (from 67 in 2012 and 64 in 2011). It is evident that people across Atkins really care about the success of our organisation (95%) and about our goals (86%). There has also been a significant increase in the level of satisfaction with job security, particularly in the UK. We will continue to use the feedback from this survey to sustain an ongoing dialogue with our people through which we can continuously improve our employee engagement. Day to day, we maintain regular communication with our employees through chief executive officer (CEO) letters, Group updates and information, project successes and stories about our people, which we make available via our Group wide intranet. Following the announcement of our financial results, we provide updates on our Group performance through an online presentation from our Group finance director and video interview with our Group CEO. We also make these available as a recorded telephone message and a written transcript. Our senior leadership teams hold meetings and open discussions to give employees the opportunity to ask questions about our strategy and future plans. Where geography presents a challenge for face to face communication, such as in the Middle East and North America, our CEOs have engaged with employees through webinars and all hands calls, giving employees the chance to participate and ask questions directly. Another popular communication channel is our CEO blogs, through which our regional CEOs share informal thoughts, images and updates, and invite comments from employees. Figure 2: Viewpoint Group engagement results as provided by Ipsos MORI What is engagement and why do we measure it? Ipsos MORI has identified three components alignment, involvement and loyalty that can help us to understand and improve the experience of our employees. Alignment Involvement Loyalty Overall score Global norm Global norm Global norm Global norm Alignment is about how closely an individual s objectives, values and aspirations match those of the Group. Involvement is about how involved people feel with their job. We measure this through key questions around job satisfaction, motivation and personal fulfilment. Loyalty measures the emotional tie people have to the Group as a whole, i.e. how proud they feel, what their outlook is and how they would speak about the Group to others. The employee engagement score is an average score against which employee engagement can be measured across all three components. Our employee engagement score for can also be measured against the Ipsos Global Sector Norm in other words, how we compare against the responses given by employees in other organisations in the professional services sector, both globally and regionally.

53 Strategic Report 51 Human Resources Review continued People across our business really care about the success of the organisation (95%) and about its goals (86%). In we celebrated Atkins 75th anniversary which provided an excellent opportunity to involve and unite all our employees around one inspiring common theme. As well as regular articles on our intranet about our technical heritage, we invited employees to participate in photo competitions via social media, and our intranet and asked our employees to nominate colleagues for a Sir William Atkins medal. The medals were awarded to 89 employees at all levels Group wide in recognition of their outstanding achievements. Everyone was given the opportunity to join a 75th anniversary celebration in their regional business, which ranged from vintage fancy dress and tea parties to music festivals and beach parties. During the year, we also sought the opinions of our employees and our leaders to develop a new employer brand identity, known as the Atkins Way, which is a celebration of the quiet brilliance of Atkins people. It defines our external recruitment activity and underpins the range of Group wide and localised communications we share with our employees. The Atkins Way works on the basis that the Group is the sum of our people and that nobody can tell the story of an organisation as effectively and as genuinely as the people who work for it. Investment in people To achieve our vision to be the world s best infrastructure consultancy we need to develop and enhance the capabilities and performance of our people. The Group s annual training spend of over 18.5m was an increase on the previous year, reflecting an increased investment in performance management, personal development and sales excellence. This performance-related approach provides our employees with the skills and focus to support our Group to deliver on higher growth and higher margin activities. During the year we have implemented the My Career programme across all our regions. My Career focuses on the performance and development of all our people and includes an online performance and development review system and also a learning management portal providing online access to key learning resources. My Career aims to help individuals take responsibility for their performance and development and create a better dialogue between individuals and their line managers in support of their careers. Our aim is to sustain a high-performance culture across Atkins and to help our people make the most of their talent. One of the key challenges for our industry is to develop the next generation of engineers to solve the challenges of urbanisation, climate change and energy generation. For this reason our graduate and apprenticeship programmes are at the heart of developing our talent for the future. We continue to work in partnership with local schools and colleges through our Science Technology Engineering & Maths (STEM) ambassadors to engage with young people and encourage them towards careers in our industry. One of the key requirements of our growth ambition is the capability of our people to get close to our clients and to understand their drivers and requirements. Our global sales excellence programme was introduced during the year and over 800 staff attended training workshops to develop their skills in client engagement. Reward Pay movement across the Group varies by business and geography. This reflects both the diversity of our business and the variability in market conditions between businesses and regions. With effect from 1 April the average salary increase was 4% across the Group, with significant variation by region. To inform the salary review and other reward decisions, we conduct comprehensive annual benchmarking studies across our regions (UK, North America, Middle East, Asia Pacific and Europe). We use the data to improve the competitiveness of our remuneration packages and to help line managers with pay decisions. Approximately 1,000 senior leaders worldwide participate in our executive bonus scheme (EBS). This incentivises the delivery of above-average financial results and exceptional individual performance by rewarding the achievement of stretching targets and personal objectives. A new cash performance measure was introduced to the EBS in for our most senior participants to incentivise good cash performance throughout the whole year and reflect how effective each business is at converting profits into cash. This has in turn helped to encourage better long-term behaviour in this area. The success in driving strategic focus on the cash flow cycle has resulted in the Group s decision to extend the population subject to the cash measure to the next level of the organisation. Further details of this measure are provided in the Remuneration Report (page 98). A discretionary bonus scheme covers the wider Atkins population. We expect to pay a bonus to around one third of staff members, recognising individual contribution and performance. Corporate Information Financial Statements Strategic Report

54 52 Strategic Report Human Resources Review continued We are committed to building a diverse organisation. Employee share ownership is encouraged across the Group to align the interests of our employees and our shareholders and to enable our employees to share in the success of the Company. In the UK, we operate a share incentive plan (SIP) that provides a tax-efficient mechanism for employees to become shareholders. Approximately 12% of eligible employees participate in the SIP. We have maintained our focus on the management of our historic defined benefit pension liabilities. The triennial valuation of the Atkins Pension Plan was agreed in February providing a stable repayment plan mechanism to manage our deficit contributions over the next 12 years. Diversity We are committed to building a diverse organisation to maximise the skills available to us in the geographies in which we operate. Our policies have been adopted to ensure this commitment is implemented from the point of recruitment and continues throughout an individual s employment. Our people are supported to develop to their full potential regardless of sex, race, age, religion or belief, disability, sexual orientation, gender identity, marriage and civil partner status, pregnancy, parental obligations or background, subject to the laws of the jurisdictions in which we work. The Group encourages recruitment, training, career development and promotion on the basis of aptitude and ability, without regard to disability. We are also committed to retaining and retraining as necessary employees who become disabled during the course of their employment. Gender diversity continues to be a key focus for the Group and our goal is to continue to develop an organisational culture that fully embraces male and female contributions in a male-dominated industry. We are working towards achieving a better gender balance to provide an environment where women want to stay and develop their careers. We have a range of objectives which have been devised to align to these goals. The women s leadership council links senior women across all regions and is committed to supporting women throughout the organisation to develop and fulfil their potential. A women s professional network is also now well established in most regions, which has helped women to feel well-connected across Atkins. We continue to work to increase the proportion of female staff in Atkins and have developed a range of flexible working options to help us both recruit and retain a broader range of staff. Viewpoint results showed an improvement in the scores provided by women in many areas, so a culture is developing which embraces women and means they want to stay. We have maintained the level of senior females in the Group (12.7%) but recognise that we have more work to do to achieve our target of 15% by Figure 3: Viewpoint Group scores by gender as provided by Ipsos MORI Engagement score by gender 69 Global norm 57 70

55 Strategic Report 53 Human Resources Review continued Our aim is to sustain a highperformance culture across Atkins and to help our people make the most of their talent. Figure 4: Gender split 1 We remain committed to having a diverse workforce and continue to work towards our goal of increasing female representation at a senior level to 15% by Gender split Board membership Group senior leadership team Senior management 2 Employees Strategic Report ,659 11,575 There were nine members of the Board as at 31 March of whom eight were male and one was female. As at 31 March two senior leadership team members were female. There were 1,106 senior managers (including directors of subsidiary companies within the Group) at Atkins as at 31 March. Of this number 966 were male and 140 were female. Excluding our Group senior leadership team and senior manager population there were 16,234 employees at Atkins of whom 11,575 were male and 4,659 were female as at 31 March. Financial Statements 1. These figures exclude agency staff. 2. We define senior managers as participants in the EBS and directors of our subsidiary companies. Corporate Information

56 54 Strategic Report Corporate Sustainability Review Atkins is shaping a sustainable future for all. >

57 Strategic Report 55 Corporate Sustainability Review continued More information is available in our digital Sustainability Report at: Atkins continues to provide societal value, helping to shape a sustainable future for all. This year we have launched a set of principles, based on societal, environmental and business-focused pillars to frame our approach to sustainability for the future. We have restructured our Corporate Sustainability Review around our principles, to articulate Atkins true value, and have launched an engagement programme as a means of forming an inclusive view of sustainability and how we intend to develop it within our business. Our principles have been woven into our office sustainability programme, RACE2. Over a three-year period, our initial programme, RACE, helped to reduce our electricity usage by 12%. RACE2 has broader aims, encompassing environmental and social issues, and challenging us to live and breathe our principles in our offices. Leadership We are steadfast in our drive towards becoming a more responsible and sustainable organisation. Our Group chief executive officer, Prof Dr Uwe Krueger, has been unceasing in his pursuit of safety in the workplace, spearheading our See it, Stop it, Save a life campaign which empowers our people to stop work immediately whenever anything appears unsafe. Senior leaders across Atkins demonstrate their commitment to safety by engaging our people during safety tours and using safety moments during meetings to focus on key safety issues. They also engage Atkins staff in sustainability, encouraging its integration into our day to day practices. Raising safety and welfare standards The launch of the Atkins minimum requirements (AMRs) for construction safety in the Middle East provides a framework which enables us to influence clients and contractors to raise health, safety and welfare standards, and to demonstrate our strong industry leadership. Industry experts rewarded us for our behavioural safety model with a Health and Safety Initiative of the Year award at Qatar s annual industry event. The model embeds safety into organisational culture and empowers our people to put safety at the heart of everything they do. A society for our future Inspiring the next generation Inspiring the next generation of engineers to build a sustainable future will be critical to our success and to that of society. This year we have used innovative approaches, such as cycling and model city building workshops, to engage the next generation. Supporting our people on a development pathway Our sustainability knowledge and skills principle commits us to supporting our people on a development pathway, equipping them to deliver innovative and sustainable solutions. We have held an Atkins Urban Environment Conference, enabling specialists from our planning teams around the world to share knowledge, promote technical excellence and champion best practice, and have promoted knowledge-sharing activities by sponsoring a UK Construction Industry Council and Royal Institute of British Architects event, integrating health and safety learning into undergraduate architect training. We also hosted a webinar to showcase a project that evaluated the energy performance, water usage and biodiversity of a client s most sustainable building and made recommendations to generate a 30% energy reduction and improved end user experience. Social and community investment To enable our people to utilise their skills and expertise to support the social, environmental and economic health of our communities, we have formalised a volunteer programme in the UK. In America, the Atkins Foundation, established in 2006, serves the communities in which our people live and work, supporting programmes that improve quality of life and educate children in the areas of engineering, mathematics, science and technology. Corporate Information Financial Statements Strategic Report

58 56 Strategic Report Corporate Sustainability Review continued A healthy, safe and secure workplace We aim to promote and achieve the highest degree of physical, mental and social wellbeing in our workplace. Journey to natural safety Three years ago, we introduced a safety maturity model, plotting a journey from unaware through compliance to proactive, and ultimately to the integration of safety as a natural aspect of our culture. This year, all our regions and businesses reached the compliance level, with a significant number moving towards proactive. Safety performance The accident incident rate (AIR) measures accident performance. Our overall AIR figure for staff summarises AIRs for our people and contractors working in offices, engineering and construction. We set a more stretching AIR benchmark than suggested by the UK s Health and Safety Executive (HSE) Labour Force Survey data. The figures for our people in office and engineering roles have outperformed the benchmark, with the figures for construction roles being slightly over our benchmark but still below the HSE Labour Force Survey indicator. Contractor performance for engineering and construction has not met our internal benchmark due to its over-sensitivity to low contractor numbers. Viewpoint survey In we incorporated safety questions into our employee satisfaction survey, Viewpoint. 84% of respondents believe that Atkins is committed to the health and safety of its staff and 96% understand how to work safely. We have developed a manager safety leadership programme to ensure the continued improvement of communication, feedback and safety practices, which will be embedded during. Accident incident rate (AIR) Staff 2,000 1,800 1,600 1,400 1,200 1, Accident incident rate (AIR) Contractors 1,600 1,400 1,200 1, Office actual Office benchmark Office actual Office benchmark Engineering actual Engineering benchmark Engineering actual Engineering benchmark Safe and Secure by Choice We have heightened our focus on security, developing a service that provides tailored medical, security and travel assistance to address risks associated with international travel. We have expanded our behavioural safety programme to include security. This Safe and Secure by Choice programme will soon include a set of security principles relating to people, property and information. Construction actual Construction benchmark Construction actual Construction benchmark Industry leadership As part of our Group wide approach to industry safety leadership, we have been involved in restructuring the Consultants Health and Safety Forum, ensuring that it remains fit for the future. A strategic leadership team will oversee United Kingdom and Europe and Asia Pacific safety forums, with new teams focused on environment and quality. We will continue to support the Middle East and North Africa safety executive and strive towards the establishment of a consultants forum in North America.

59 Strategic Report 57 Corporate Sustainability Review continued More information is available in our digital Sustainability Report at: An environment with a future A low carbon economy We have continued our efforts to become a low carbon organisation. Measuring and reporting emissions to stakeholders and investors We continue to report and verify our emissions data. Atkins has disclosed carbon data to the Carbon Disclosure Project (CDP), the global platform for organisational disclosure of investor-relevant climate change data, for the last five years. Our highest CDP score to date, 84 out of 100, was achieved this year. For the fourth consecutive year, the Group achieved certification to the ISO international standard for quantification and reporting of greenhouse gas emissions. This year, we have expanded the scope of the verification programme to include North America. We report on gas, electricity, liquid fuel consumption and travel emissions. Table 1 shows total emissions by region split between scopes one, two and three, as defined by the Greenhouse Gas Protocol. Society: Progress against our priorities 2012/13 priorities Status Overview of our performance Develop a more strategic approach to promoting science, technology, engineering and mathematics (STEM) to young people to increase the impact of our activities Agree a volunteering framework in the UK Evaluate progress towards natural safety Promote vibrant behavioural safety culture Table 1: Total emissions by source, region and scope in tonnes of CO 2 for the year ended 31 March Regional Region Scope 1 Scope 2 Scope 3 Total Source Gas Liquid Fuels Refrigerants 1 Road 2 Electricity Heat Rail Air UK 2, ,032 7,951 1,177 6,313 27,989 Europe ,600 Asia Pacific ,072 2,168 4,353 Middle 623 1,931 2,136 4,690 East North 2 8,471 11,293 1,642 21,408 America Source 2, ,563 24, ,247 12,526 60,040 Totals Total 22,119 Total 24,148 Total 13,773 Expressing the emissions using employees as a ratio gives us a figure of 3.4 tonnes CO 2 e per employee. This is a reduction on the ratio for the year ended 31 March of 3.5 tonnes CO 2 e per employee. Reducing our emissions Our first office sustainability programme, RACE, helped reduce our worldwide energy consumption. Its successor, RACE2, retains this focus on energy efficiency, aiming to facilitate cost and carbon pollution reductions. Progressing STEM hubs established around the UK as part of a broader programme of improved coordination /15 priorities Commence Safe and Secure by Choice programme Introduce online Atkins Operating Safely (AOS) system to improve safety risk identification and control Help establish executive consultants safety forum in North America Carry out programme of behavioural safety and security training for line managers Transition to a low carbon economy Atkins has joined an industry and UK Government initiative, The Infrastructure Carbon Review, which aims to utilise new technologies, construction techniques and low-carbon materials to reduce carbon emissions from infrastructure projects by 24m tonnes by Completed Volunteer programme commitment in the UK to further encourage our people s support for charities Assessment indicates progress, with all regions reaching compliance and some approaching proactive Improvement in safety accident statistics and positive feedback from Viewpoint survey suggest progress Corporate Information Financial Statements Strategic Report

60 58 Strategic Report Corporate Sustainability Review continued More information is available in our digital Sustainability Report at: The UK Foreign and Commonwealth Office commissioned us to work with national government agencies and city governments to develop guidance for eco-low carbon urban planning in China. Affordable, reliable and clean energy Our efforts to help society s transition to a low carbon economy have taken a number of forms. These include supporting projects for our clients which aim to harness low carbon energy sources, some examples of which are given below. We are helping to design, build and deliver the world s first tidal lagoon in Swansea Bay, generating electricity equivalent to Swansea s entire domestic consumption and saving over 200,000 tonnes of CO 2 annually for its design life of over 100 years. We have won a contract to lead a pan-european consortium bringing sustainable energy to 23 countries in eastern and southern Africa, and another, with a consortium partner, covering a further 26 countries in western and central Africa. Environment: Progress against our priorities ITER is a first-of-a-kind nuclear reactor, capable of producing unlimited supplies of cheap, clean, safe and sustainable electricity from atomic fusion. Atkins is the architect-engineer responsible for the design, procurement management and construction management of buildings, site infrastructure and services. Respect for the environment Managing resources Our office sustainability programme, RACE2, encompasses such environmental issues as efficient use of materials, control of water, waste and recycling. Our operations in Hong Kong received the Class of Excellence from the Hong Kong Awards for Environmental Excellence, its highest recognition for waste reduction. Building the resource resilience of our clients Our thought leadership report, Future Proofing the UK Water Sector, focuses on the asset-heavy water and wastewater sectors in which today s decisions have far reaching consequences. Working with Decision Strategies International, we explored a number of scenarios for the development of the UK s water industry up until /13 priorities Status Overview of our performance Communicate guiding sustainability principles to our people Launch office sustainability programme Improve monitoring of carbon emissions in North America Evaluate carbon in supply chain /15 priorities Undertake global environmental assessment to prioritise risks and opportunities Develop environmental training and competency package in the UK and global training course Group wide deployment of RACE2 Protecting and improving ecosystems Construction projects provide opportunities for sustainable delivery, enhancing societal value and impact. We have advised clients on biodiversity on a number of key projects. In designing Dubai Creek Harbour, we persuaded the client of the benefits of incorporating a bird sanctuary adjacent to the development, influencing the building of an education centre and interconnecting walkways. In Ireland s Tolka Valley Greenway project we restored nearly 20 hectares of parklands, preserving a variety of native habitats, and provided advice on sustainable river management, allowing flooding whilst controlling water quality. Progressing Sustainability principles finalised and in use within global engagement programme RACE2 developed and launched in the UK and Europe, with remaining regions to follow in North America carbon emission data included in ISO verification Completed Partnering with our supply chain policy, incorporating sustainability, published. Further work to understand supply chain carbon footprint planned

61 Strategic Report 59 Corporate Sustainability Review continued More information is available in our digital Sustainability Report at: A responsible business of the future Technical excellence We continue to plan, design and enable sustainable value and technical excellence for our clients, utilising management standards to develop more collaborative client relationships. By way of example, our UK rail business obtained formal BS1100 business standard accreditation. To underpin our delivery of high-quality projects, we are improving management and coordination of Building Information Modelling (BIM) activities and accompanying computer-aided design standards. New Civil Engineer magazine s prestigious Consultant of the Year Award confirmed our outstanding performance. Economic and environmental resilience We support governments, investors and other authorities in achieving economic and environmental resilience through infrastructure and technological investment. Atkins is participating in the Qatar Government s transport infrastructure programme, part of Qatar s National Vision 2030, which aims to transform Qatar s society by 2030, so that it is capable of sustaining its own development and providing a high standard of living for its people. Strong governance and accountability Respect for human rights is critical to us and we seek to have a positive influence wherever we operate. In the Middle East the AMRs enable us to influence clients and contractors to raise standards of health, safety and welfare during construction projects. Clients also request our support in this area. For instance, Qatar s Public Works Authority requested our review of labour camp welfare conditions, which resulted in operational improvements and a standard design for labour camps. Our Group policies, along with our sustainability principles, determine our approach to demonstrating responsibility, transparency and fairness and outline our commitment to the provision of equal opportunities and a safe and secure workplace. We communicate our support for human rights to stakeholders, including employees, clients and shareholders, through a variety of channels, including this report and the living embodiment of our values in our culture. International business, local service We recognise the importance of sustaining local economies by employing local expertise and selecting and developing local suppliers. In addition, our Energy business in Australia has employed local people to deliver a project in China, sharing good practice and equipping workers with skills to help them earn their living long after the project s completion. Strategic engagement for innovation One of our sustainability principles advocates collaboration with key organisations to develop innovative solutions that meet the complex sustainability challenges faced by society. In China we put this into practice at the Beijing UK-China business summit attended by UK Prime Minister David Cameron and Minister for UK Trade and Investment Lord Livingston. Another example of this principle in action is where our UK water and environment business has introduced innovation hubs, to find new ways of solving complex challenges and showcasing new approaches. Financial Statements Strategic Report By way of example, multidisciplinary design work for the Doha Metro system included the use of local building materials. This supported the regional economy and reduced the environmental impact of the project in compliance with the Global Sustainability Assessment System adapted for Qatar. Corporate Information The Strategic Report was approved by the Board and signed on its behalf by Uwe Krueger Chief Executive Officer 11 June

62 60 Board of Directors Allan Cook CBE Chairman Prof Dr Uwe Krueger Chief executive officer Heath Drewett Group finance director Alun Griffiths Group HR director James Cullens Group HR director designate Background and experience Allan Cook is a chartered engineer with more than 30 years international experience in the automotive, aerospace and defence industries. He was chief executive of Cobham plc until December Prior to this he held senior roles at GEC-Marconi, BAE Systems and Hughes Aircraft. He was awarded a CBE for services to the defence and aerospace industries and is a fellow of the Royal Academy of Engineering. In he became lead non-executive director of the UK Department for Business, Innovation & Skills (BIS). Prof Dr Uwe Krueger is a physicist who studied at the University of Frankfurt, graduating with a PhD in complex system theory. He has spent the majority of his career leading engineering and consulting organisations in North America, Europe, the Middle East and Asia Pacific. He began his career at international strategy consulting firm A. T. Kearney, followed by leadership positions at Hochtief AG, an international provider of construction services. More recently he was chief executive officer of Swiss company Oerlikon. He joined Atkins from Texas Pacific Group and Cleantech Switzerland. Heath Drewett is a graduate in mathematics from Peterhouse, Cambridge. He started his career at Price Waterhouse (now PricewaterhouseCoopers LLP) where he qualified as a chartered accountant. He held a variety of senior finance and corporate development roles at British Airways Plc (BA) and The Morgan Crucible Company plc. He spent seven years in BA s finance team, latterly holding the position of head of business performance. Alun Griffiths joined Atkins in 1986 and was appointed Group HR director in He has a background in human resources management and management consultancy. He has worked in a number of business management and corporate roles, including HR strategy and marketing. In his management consultancy career, he has led a wide range of projects in the areas of restructuring, organisational development and privatisation in the UK and worldwide. He is an economics graduate and a fellow of the Chartered Institute of Personnel and Development. A graduate of Cambridge University, James Cullens brings significant senior leadership experience gained both in the UK and internationally. James was previously Group HR director for Hays plc, having held similar positions previously with Linde AG, The BOC Group plc and PA Consulting Group. He is a fellow of the Chartered Institute of Personnel and Development. Date of appointment(s) Non-executive director, September 2009 Chairman, February 2010 External appointments Chairman, Selex ES Ltd Chairman, Finmeccanica UK Limited Deputy chairman, Marshall of Cambridge (Holdings) Limited Member of the operating executive board, J.F. Lehman & Company (New York, USA) Chairman, the Sector Skills Council for Science, Engineering and Manufacturing Technologies Alliance (SEMTA) Chairman, the UK Government s Skills & Jobs Retention Group Director, Baker Dearing Educational Trust Lead non-executive director, BIS Committee membership Chairman, Nomination Committee Executive director, June 2011 Chief executive officer, August 2011 Board member, ONTEX S.A. (Zele, Belgium) Board member, SUSI Partners AG (Zurich, Switzerland) Executive director, June 2009 None Executive director, March Non-executive director, UKRC Community Interest Company, trading as WISE (Women in Science and Engineering) Non-executive director, The McLean Partnership Limited Non-executive director, Severfield plc None None None None Executive director, July Non-executive director, Chartered Institute of Personnel and Development Member of the International Advisory Board, Open University Business School 1. Alun Griffiths, Group HR director, will retire at the conclusion of the annual general meeting on 30 July. Admiral the Lord Boyce and Joanne Curin stepped down as non-executive directors on 31 July and 31 January respectively.

63 61 Board of Directors continued Fiona Clutterbuck Non-executive director Allister Langlands Non-executive director Thomas Leppert Non-executive director Dr Raj Rajagopal Non-executive director Rodney Slater Non-executive director Background and experience Fiona Clutterbuck has substantial experience in all areas of corporate finance, including a particular focus on the financial institutions sector, gained during 15 years at Hill Samuel and HSBC and seven years at ABN AMRO. She has a LLB (Hons) from the University of London and qualified as a barrister in Allister Langlands recently retired from international energy services company John Wood Group PLC (Wood Group) after 23 years, serving as chairman, chief executive, deputy chief executive and group finance director. Prior to joining Wood Group, he was a partner with international accounting firm Coopers & Lybrand Deloitte (now PricewaterhouseCoopers LLP). Allister is a member of the Institute of Chartered Accountants of Scotland. He holds a MA (Hons) in Economics from the University of Edinburgh and has completed the Harvard Advanced Management Program. Thomas Leppert is the chief executive officer at Kaplan, Inc. His professional work has spanned leadership positions in both the public and private sectors including construction, financial services and real estate. He was the elected Mayor of Dallas, Texas from 2007 to Prior to this he was the chairman and chief executive officer of the Turner Corporation, vice chairman of Pacific Century Financial Corporation and its major subsidiary the Bank of Hawaii, president and chief executive officer of Castle & Cooke Properties, Inc., and national partner of Trammell Crow Company, Inc. He began his career at McKinsey & Co. where he was elected a principal. He holds a MBA with distinction from Harvard Business School. Dr Raj Rajagopal held several positions at BOC Edwards before being appointed chief executive, a position he held until November He was an executive director of The BOC Group plc until November He was awarded an honorary doctor of science degree by Cranfield University in 2004 and the Institution of Engineering and Technology s (IET) IEE Eric Mensforth International Gold Medal for outstanding contribution to manufacturing technology and management in He is a fellow of the Royal Academy of Engineering, the IET, the Institution of Mechanical Engineers, the Chartered Institute of Management and the Institute of Directors. A lawyer by profession, Rodney Slater is currently a partner at law firm Patton Boggs LLP, where he is a leader of its transportation practice, working on projects related to transportation infrastructure. He was the secretary of transportation under President Bill Clinton between 1997 and He served as administrator of the United States Federal Highway Administration from 1993 to 1996 and was assistant attorney general for the State of Arkansas earlier in his career. In his tenure as secretary of transportation, one of his notable achievements was the successful passing of the Transportation Equity Act for the 21st Century. Strategic Report Date of appointment(s) Non-executive director, March 2007 Senior independent director, July External appointments Head of strategy, corporate development and communications, Phoenix Group Non-executive director, The Paragon Group of Companies PLC Non-executive director, September Non-executive chairman, Maven Income and Growth VCT 5 PLC Non-executive director, Standard Life UK Smaller Companies Trust plc Senior independent director, Exova Group plc Non-executive director, October Chief executive officer, Kaplan, Inc. Non-executive director, June 2008 Non-executive director, Bodycote plc Non-executive director, e2v Technologies plc Non-executive director, Spirax-Sarco Engineering plc Non-executive director, Porvair plc Chairman, HHV Pumps Private Ltd (India) Chairman, The University of Manchester I3 Limited Member of the Advisory Board, Centre for Business Research of Cambridge University Non-executive director, September 2011 Partner, Patton Boggs LLP (Washington DC, USA) Non-executive director, Verizon Communications, Inc. (USA) Non-executive director, Kansas City Southern (USA) Non-executive director, Transurban Group (Australia) Advisor, The Northeast Maglev (TNEM) Advisor, Brambles USA Corporate Information Financial Statements Committee membership Audit Committee Nomination Committee Remuneration Committee Chairman, Audit Committee Nomination Committee Nomination Committee Chairman, Remuneration Committee Audit Committee Nomination Committee Nomination Committee Remuneration Committee

64 62 Directors Report The directors of a company are required to prepare a strategic report about that company for each financial year, designed to inform shareholders and help them assess how the directors have performed their duty to promote the success of the company. Additionally the directors are required to prepare a directors report containing certain disclosures, some of which may be included in the strategic report if they are considered to be of strategic importance. The directors of WS Atkins plc are pleased to present their Directors Report for the financial year ended 31 March. The following information has been included in the Strategic Report and is incorporated into this report by reference: greenhouse gas emissions (Corporate Responsibility Review, page 57) review of the performance and future development of the Group (Strategic Report, pages 2 to 59) Principal Risks and Uncertainties (pages 44 to 47) employment matters, including inclusion and diversity and provision of information to, and consultation with, employees (Human Resources Review, pages 48 to 53). The following pages of the Annual Report and Accounts contain all other statutorily required information and information required to be disclosed under the UK Listing Authority s Listing Rules and Disclosure and Transparency Rules (the LRs and DTRs respectively). To the extent necessary, certain information is incorporated into this report by reference, as follows: Chairman s Statement (pages 6 to 7) Corporate Report (pages 66 to 73) Nomination Committee Report (pages 74 to 75) Audit Committee Report (pages 76 to 80) Remuneration Report (pages 81 to 105) financial instruments and financial risk management (note 21 to the Financial Statements, pages 129 to 134) The Annual Report will be laid before shareholders at the annual general meeting (AGM) to be held at The Royal College of Physicians, 11 St Andrews Place, Regent s Park, London NW1 4LE at 1100 on Wednesday 30 July. Details of the business to be considered at the AGM, together with an explanation of each of the resolutions, are set out in the separate notice of meeting. Directors The names and biographies of those persons serving as directors of the Company as at the date of this report are incorporated into this report by reference and can be found in the Board of Directors section (pages 60 to 61). Under the Company s articles of association all directors must retire at the first AGM following their appointment by the Board and may offer themselves for election by shareholders. In line with the requirements of the UK Corporate Code all directors will retire at each AGM and, if eligible, may offer themselves for re-election. This year all the directors except Alun Griffiths and Rodney Slater, being eligible, will offer themselves for re-election. The Board considers that the performance of each of the directors standing for re-election continues to be effective and that each of them demonstrates a strong commitment to their role. Indemnification of and insurance cover for directors and officers Directors and officers of the Company and its subsidiaries benefit from directors and officers liability insurance cover in respect of legal actions brought against them. In addition, directors of the Company are indemnified in accordance with article 138 of the Company s articles of association to the maximum extent permitted by law, such indemnities being qualifying third party indemnities. Prior to the adoption of new articles of association by shareholders on 3 September 2008, all directors in appointment on that date had separate deeds of indemnity. These indemnities, which still remain in force, are available for inspection by shareholders at the Company s registered office during normal business hours and will be available for inspection at the AGM. Neither the insurance nor the indemnities provide cover where the relevant director or officer has acted fraudulently or dishonestly. Articles of association The Company s articles of association set out the Company s internal regulation and cover such matters as the rights of shareholders, the appointment and removal of directors, the power to issue and buy back shares and the conduct of Board and general meetings. A copy of the Company s articles of association is available on the Group s website or on request from the company secretary. Amendments to the articles of association must be approved by at least 75% of those voting in person or by proxy at a general meeting of the Company. In accordance with the Company s articles of association, directors can be appointed or removed by the Board or by shareholders in general meeting. Subject to the provisions of relevant legislation, the Company s articles of association and any directions given by a special resolution of shareholders, the Board of directors may exercise all the powers of the Company and may delegate authorities to committees and management as it sees fit. Details of the main committees of the Board are contained in the Corporate Report (pages 66 to 73), the Nomination Committee Report (pages 74 to 75), the Audit Committee Report (pages 76 to 80), the Remuneration Report (pages 81 to 105) and on the Group s website. Research and development The Group develops and delivers innovative technical solutions to its clients, the costs of which are expensed to the income statement. The Group obtains enhanced tax relief for these costs in certain territories.

65 63 Directors Report continued Political donations and expenditure The Group made no political donations and incurred no political expenditure in the UK or European Union during the year ended 31 March (31 March : nil). On 1 October 2010 the Group completed the acquisition of The PBSJ Corporation and its subsidiaries (the acquired companies). On acquisition, the acquired companies had, in accordance with relevant US federal and state election laws, historically made political donations in the US both directly and to affiliated US state and federal political action committees (PACs). From 1 April 2011 until 25 June 2011, the PACs were funded partly by contributions from the acquired companies and partly by employee contributions. Since 25 June 2011, the PACs have been funded solely by employee contributions. Since 1 April 2012, our policy has been to make corporate political donations in the US only on the following basis: directly to non-partisan ballot initiatives supporting infrastructure development and maintenance; or to individual candidates and political parties only via the PACs, funded entirely by employee contributions. Pursuant to a change in Florida law, the Group s Florida PAC was wound up in October. Only one PAC remains, operating in all 50 states. Under this policy there were no corporate political donations during the year ended 31 March (: $18,800 ( 11,894)). In addition, the sole remaining PAC continues to make donations funded entirely by employee contributions. Shares Share capital As at the date of this report, the Company s share capital consists of 104,451,799 issued and fully paid ordinary shares each with a nominal value of 0.5p, 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, can be found in note 34 to the Financial Statements (page 171). The rights and obligations attaching to the Company s ordinary shares are contained in the Company s articles of association and the Companies Act 2006 (the Act). In summary, the ordinary shares allow holders to receive dividends and to exercise one vote on a poll per ordinary share for every holder present in person or by proxy at general meetings of the Company. Shares held in treasury are not entitled to vote or receive dividends. There are no restrictions on the transfer or sale of ordinary shares and no requirements for prior approval of any transfers, except as described below. Under the Company s articles of association, the directors have the power to suspend voting rights and the right to receive dividends in respect of ordinary shares and to refuse to register a transfer of ordinary shares in circumstances where the holder of those shares fails to comply with a notice issued under section 793 of the Act. The directors also have the power to refuse to register any transfer of certificated shares that does not satisfy the conditions set out in the articles of association. The Company has a Level 1 American Depositary Receipt (ADR) programme, which enables US investors to purchase the Company s American Depositary Shares (ADSs). Each ADS represents one ordinary share and allows each holder, subject to the terms and conditions of the ADR, to receive dividend payments and vote by proxy on resolutions at a general meeting. Shares acquired through Atkins employee share schemes rank equally with all other ordinary shares in issue and have no special rights. The trustees of the Company s employee benefit trusts (EBTs) have waived the rights of the EBTs to receive dividends on shares they hold, with one EBT fully waiving this right and another waiving the right to dividends in excess of 0.01p per share. In addition neither of the trustees of the EBTs exercises its right to vote in respect of such shares. Shares held in trust on behalf of participants in the Atkins Share Incentive Plan are voted by the trustee, Capita IRG Trustees Limited, as directed by plan participants. Details of share-based payments, including information regarding the shares held by the EBTs, can be found in note 35 to the Financial Statements (page 173). At the AGM held in shareholders granted authority for the directors to allot relevant securities up to approximately one third of the issued share capital and a further one third in connection with an offer by way of a rights issue. The directors intend to seek shareholder approval for an equivalent authority at this year s AGM, details of which are contained in the notice of meeting. The Company is not aware of any agreements between shareholders that might result in the restriction of transfer or voting rights in relation to the shares held by such shareholders. Corporate Information Financial Statements Strategic Report

66 64 Directors Report continued Share purchases At the AGM held in, the Company was granted authority by shareholders to purchase up to 10,011,000 ordinary shares, representing approximately 10% of the Company s ordinary share capital as at 12 June. No ordinary shares were purchased pursuant to this authority during the year ended 31 March or to the date of this Annual Report and Accounts. This authority will expire at the forthcoming AGM and the Company will seek shareholder approval for an equivalent authority (such authority being in accordance with current best practice) at this year s AGM. 4,341,000 ordinary shares of 0.5p each, representing approximately 4.2% of the Company s issued share capital, were held in treasury (the treasury shares) throughout the year and to the date of this Annual Report and Accounts following a historic share buyback programme. Significant shareholders As at the year end and the date of this Annual Report and Accounts, the Company had been notified of holdings of 3% or more of the total voting rights attaching to its issued share capital as detailed in table 1. Change of control No agreement with a director or employee of the Company provides for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) that occurs as a result of a change of control. All of the Company s employee share schemes contain provisions relating to a change of control of the Company. Under these provisions, a change of control would normally be a vesting event, facilitating the exercise of options or transfer of allocations subject to any relevant performance conditions being satisfied. The Company is not a party to any other significant agreements that take effect, alter or terminate upon a change of control other than its funding facilities, which provide that in such a situation the Company may be unable to draw down any further amounts under the facilities and/or that they may be cancelled. Table 1: Holdings of 3% or more of the total voting rights attached to the Company s issued share capital At 11 June At 31 March Number of voting rights 1 Percentage of total voting rights 1 Number of voting rights 1 Percentage of total voting rights 1 Name of holder Schroders plc 10,143, % 10,143, % Ameriprise Financial, Inc. 10,007, % 10,007, % Standard Life Investments Limited 9,118, % 9,118, % Newton Investment Management Limited 4,994, % 4,994, % BlackRock Inc. 4,971, % 4,971, % Norges Bank 3,985, % 4,054, % Royal London Asset Management Limited 3,017, % 3,017, % 1. Number and percentage of voting rights per last notification received by the Company. Directors statement of responsibility The directors are responsible for preparing the Annual Report and Accounts, the 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. The directors have prepared the Group and Company Financial Statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. In preparing these Financial Statements, the directors have also elected to comply with IFRSs, issued by the International Accounting Standards Board (IASB). 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 Company and the Group and of the profit or loss of the Company and the Group for that period. In preparing the Financial Statements, the directors are required to: select suitable accounting policies and then apply them consistently make judgements and accounting estimates that are reasonable and prudent state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the Financial Statements prepare the Financial Statements on the going concern basis, unless it is inappropriate to presume that the Group and the Company will continue in business.

67 65 Directors Report continued 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 that enable them to ensure that the Financial Statements and the Remuneration Report comply with the Act and, as regards the Group Financial Statements, Article 4 of the International Accounting Standard 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 corporate and financial information included on the Company s website. Legislation in the UK 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 this Annual Report and Accounts (pages 60 and 61), confirms that, to the best of his/her knowledge: the Directors Report contained in the Annual Report and Accounts 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 the Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group. The Board considers that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable, and that it provides the information necessary for shareholders to assess the Group s performance, business model and strategy. Going concern The directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing the Financial Statements. Disclosure of audit information The directors confirm that, as at the date this Annual Report and Accounts was approved, so far as each director is aware there is no relevant audit information of which the Company s auditor is unaware and that he or she has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Company s auditor is aware of that information. Independent auditor The Company s independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to continue in office and resolutions for its reappointment and to authorise the directors to determine its remuneration will be proposed at the forthcoming AGM. Approved by the Board and signed on its behalf by Richard Webster Company Secretary 11 June WS Atkins plc, Woodcote Grove, Ashley Road, Epsom, Surrey KT18 5BW, England Registered in England and Wales No Corporate Information Financial Statements Strategic Report As required by the LRs, the auditors have considered the directors statement of compliance in relation to those points of the UK Corporate Code which are specified for their review.

68 66 Corporate Report Letter from the chairman Dear Shareholder I am pleased to present the Board s annual report on corporate governance. This review, and the reports of the Nomination, Audit and Remuneration Committees which follow, summarise our activities in this area during the year. Shareholders look to the Board to promote the long-term success of the Company. We remain committed to excellent standards of corporate governance, based on our conviction that a strong governance framework is an essential foundation for this success. Strong governance starts with the Board. At Atkins we place great importance on having an effective team of directors comprising high-calibre individuals who bring diverse perspectives from careers spent in a wide range of industries around the world. Succession planning/board membership There have been a number of changes to the Board during the year. Admiral the Lord Boyce retired in July. He was replaced as senior independent director by Fiona Clutterbuck. Joanne Curin, non-executive director and chairman of the Audit Committee, stepped down from the Board on 31 January following her appointment as chief financial officer of Lamprell plc. Rodney Slater will be retiring from the Board after our annual general meeting (AGM) on 30 July. On behalf of the Board I would once again like to thank Lord Boyce for his commitment to the Company during his time as a director, extend our thanks to Joanne for her valued contribution to the Board and leadership of the Audit Committee over the last five years and also thank Rodney for his input during his three-year tenure. I am pleased to take this opportunity to welcome both Allister Langlands and Thomas Leppert, who joined the Board as independent non-executive directors on 4 September and 1 October respectively. These appointments complement and further enhance the wide-ranging skills we are privileged to have on our Board. Allister brings a wealth of knowledge of the energy industry, while Thomas has extensive experience in both the public and private sectors including construction and consultancy in the North American market. Allister has succeeded Joanne as chairman of the Audit Committee. Alun Griffiths, our Group HR director, will retire from the Board at the conclusion of our AGM on 30 July. Alun has been with the Group for 28 years and has served on the Board as an executive director for the past seven years. Alun has made an outstanding contribution to the Group, and the Board and I would like to thank him for his long-standing counsel and commitment during this period. Alun will be succeeded as Group HR director by James Cullens, who joins us from Hays plc. It is my pleasure to welcome James, who joins the Board on 1 July. Diversity The Board recognises that gender imbalance among the Group s employees is an issue, as it is for many other organisations in the science, engineering, maths and technology sectors. Atkins continues to drive initiatives both within the Company and the wider industry to promote diversity, more details of which can be found in the Human Resources Review (page 52). The Board believes in the benefits of greater gender diversity at Board level and is actively supportive of measures to achieve this without putting quotas in place. Our focus remains on attracting the right talent and skills irrespective of gender or ethnicity, resulting in the appointment of two male directors during the year. The Board has previously set out its aspiration to have one third of its Board members as women by The retirement of Joanne Curin has reduced the number of women on our Board to one. Today, the Board s make-up reflects the increasing internationalisation of the Group with directors demonstrating diversity of perspective, experience, thought, gender, ethnicity and nationality. Nevertheless, we remain committed to achieving a membership of at least one third women on the Board by Yours faithfully Allan Cook Chairman 11 June

69 67 Corporate Report continued Statement of compliance with the Code Throughout the year ended 31 March the Company complied with the provisions of the UK Corporate Code (the Code), published by the Financial Reporting Council (the FRC) in 2012, a copy of which is available on the FRC s website: Compliance with the Code was required commencing 1 April. The disclosures that follow mirror the five sections of the Code: Leadership, Effectiveness, Accountability, Remuneration and Relations with Shareholders. Full details of the Group s governance framework are available on the Group s website: Leadership The Board is responsible for ensuring the long-term success of the Company. It does so by determining the Company s long-term direction and strategic aims within a framework of appropriate and robust controls. A key principle of the framework is the delegation of operational management to the chief executive officer, with a matrix of authorities setting out how this is further delegated through the organisation. This enables the efficient and effective day to day operation of the Group s different businesses. Further details on the roles of the chairman, chief executive officer and senior independent director can be found on the Group s website: The chief executive officer has established two teams to enable him to discharge his responsibilities effectively: the senior leadership team (SLT) and the recently established operational leadership team (OLT). The SLT has a strategic focus while the OLT concentrates on operational matters by providing a forum for the regional chief executive officers to focus on performance, sharing best practice and knowledge. The Board has reserved a number of matters for its sole consideration. These include: consideration and approval of strategy general oversight of the Group s operations approval of significant bids and contracts the Group s capital, corporate, management and control structures approval of financial statements and shareholder communications approval of dividend policy and interim dividends approval of Group policies implementation and monitoring of internal control and risk management systems approval of significant acquisitions and disposals material changes to the Group s pension schemes. While the Board has specific responsibility for the matters reserved for its consideration, in certain areas specific responsibility is delegated to committees of the Board within defined terms of reference. The activities of these committees are discussed in more detail in the Nomination Committee Report (pages 74 to 75), the Audit Committee Report (pages 76 to 80) and the Remuneration Report (pages 81 to 105). The committee terms of reference are available on the Group s website or on request from the company secretary. In addition the Board may delegate authority to a standing committee, consisting of any two directors, to provide final sign-off for an agreed course of action within predefined parameters. Corporate Information Financial Statements Strategic Report

70 68 Corporate Report continued The key agenda items discussed by the Board during the year included: Theme Financial reporting Strategy Operations Agenda items Approval of trading updates and interim management statements Approval of the full year results, AGM notice of meeting and associated documentation for the year ended 31 March Approval of the half year results and associated documentation for the six months ended 30 September Dividend recommendation and approval (as appropriate) Quarterly performance updates and business reviews (including human resources (HR), quality, environmental, security and safety matters) Disposal of Peter R. Brown Construction, Inc. Acquisition of the Confluence group of companies Acquisition of Nuclear Safety Associates, Inc. Information assurance and cyber security Pension strategy and defined benefit fund triennial valuation Annual strategy review The Group s banking facilities including renegotiation of the Group s revolving credit facility Significant project approvals Review of Group risk log Budget Budget for the Group for the year ending 31 March 2015 Business presentations Shareholder engagement Employees Board Asia Pacific Energy Faithful+Gould Middle East North America United Kingdom and Europe framework review, including review of risk management and internal controls Review of the proposed code of conduct Approval of Group policies and Board committee terms of reference Directors conflicts of interest and annual review of authorised conflicts Appointment of the independent auditor and approval of its audit fee Updates on the views of shareholders following the announcement of results, investor meetings and roadshows Independent feedback from the Group s broker following investor meetings Reports from the investor relations director Consideration of market reaction to key announcements Employee diversity, particularly gender diversity Talent development and succession planning Review of the results of the employee engagement survey Outcomes of, and actions arising from, the 2012/13 review of Board effectiveness /14 Board effectiveness review Appointment of two non-executive directors Appointment of an executive director Lord Davies second annual report on women on boards Approval of non-executive directors fees Board committee membership

71 69 Corporate Report continued The membership of the Board during the year is shown in table 1 along with a summary of attendance at meetings of the Board and its committees. Biographies for each of the directors are provided separately (pages 60 and 61). Table 1: Board membership and Board and committee meeting attendance 1 Director Board Audit Committee Remuneration Committee Nomination Committee Chairman Allan Cook (Nomination Committee chairman) 12/12 4/4 Executive directors Heath Drewett (Group finance director) 12/12 Alun Griffiths (Group HR director) 12/12 Uwe Krueger (chief executive officer) 12/12 Strategic Report Senior independent director Admiral the Lord Boyce 2 5/5 3/3 2/2 Fiona Clutterbuck (senior independent director from 31 July ) 2 12/12 4/4 8/8 4/4 Independent non-executive directors Joanne Curin (Audit Committee chairman to 31 January ) 3 9/10 4 3/3 4/4 Allister Langlands (Audit Committee chairman from 1 February ) 3,5 7/7 2/2 1/1 Thomas Leppert 6 4/5 6 1/1 Raj Rajagopal (Remuneration Committee chairman) 12/12 4/4 8/8 4/4 Rodney Slater 11/12 7 8/8 4/4 1. Attendance is expressed as number of meetings attended/number eligible to attend. 2. Admiral the Lord Boyce retired as an independent non-executive director and senior independent director on 31 July. Fiona Clutterbuck succeeded him as senior independent director. 3. Joanne Curin retired as an independent non-executive director and Audit Committee chairman on 31 January. Allister Langlands succeeded her as Audit Committee chairman on 1 February. 4. Joanne Curin was unable to attend one of the Board meetings due to conflicting commitments. 5. Allister Langlands was appointed as an independent non-executive director on 4 September. 6. Thomas Leppert was appointed as an independent non-executive director on 1 October. One of the Board meetings coincided with a prior arrangement. 7. One of the Board meetings coincided with a prior arrangement. The senior independent director led the appraisal of the chairman s performance. She sought input from all directors before discussing her findings with the independent non-executive directors. She then provided feedback to the chairman. During the year, the independent non-executive directors also met regularly with the chairman. Allan Cook s external commitments changed during the year following his appointment as the lead non-executive director of the UK s Department for Business, Innovation & Skills. To enable him to carry out his responsibilities as chairman, he continues to spend at least three days per week with the Company. Directors conflicts of interest Each director is required, in accordance with the Companies Act 2006 (the Act), to declare any interests that may give rise to a conflict of interest with the Company on appointment and subsequently as they arise. Where such a conflict, or potential conflict, arises the Board is empowered under the Company s articles of association to consider and authorise such conflicts as appropriate. In addition, the Company undertakes an annual review of all authorised conflicts to ensure such authorisation remains appropriate, the last such review having taken place in November. A more detailed statement regarding how the Board operates is available on the Group s website: Financial Statements Corporate Information

72 70 Corporate Report continued Effectiveness Nomination Committee Details of the work of the Nomination Committee can be found in the Nomination Committee Report (pages 74 to 75). Performance evaluation The Board recognises the need to maintain its development and the development of individual directors to ensure its continued effectiveness and to respond to evolving best practice. This involves an ongoing process of: reflecting on past performance and the implementation of past actions consideration of future training, skill and diversity requirements identification and implementation of new actions to improve performance. The Board recognises that the process of improving its effectiveness requires continuous attention, particularly in respect of actions such as ensuring the correct Board balance and diversity (2011/12 and 2012/13), succession planning (2010/11 and 2011/12) and Board focus (2010/11 and 2012/13). The Board undertakes a rigorous and formal evaluation of its own performance and that of its committees and directors annually. The Board believes that an external evaluation every three years brings new insight into its processes and performance. An external evaluation took place in 2012/13. The /14 evaluation was conducted internally. The chairman conducted one-to-one sessions with each member of the Board and the company secretary. The following areas of its role and performance were explored in depth during the evaluation process: Board role and remit induction and continuing education information flows to the Board diversity of skills, experience, independence and knowledge on the Board, including consideration of gender diversity any other factors relevant to the Board s effectiveness, such as management of meetings. The Board received a written report from the chairman, which identified progress made and areas for improvement. This was debated and discussed in detail and a clear action plan for the year ahead was then developed and approved. The actions identified in the /14 review build upon the actions identified in previous years and focus on the diversity of the Board, succession planning, Board focus and interaction between Board members. While many of these themes have arisen in prior years, the significant changes to the membership of the Board during the year have inevitably contributed to a focus on those areas particularly affected by its composition. In addition, the increasingly diverse locations of Board members, coupled with the work undertaken in prior years to provide more timely and detailed management data (2011/12) and enhance the rolling 12-month agenda (2010/11), have led to adjustments to the frequency of meetings and increased use of technology. The key findings of the /14 performance review will be implemented in the current financial year and progress will be considered as part of the next performance evaluation. Commitment During the year all directors, including the independent non-executive directors, committed significant time to the Company, in line with the requirements stated in their letters of appointment and service contracts.

73 71 Corporate Report continued Development, business awareness and induction The chairman regularly reviews training requirements with each director in order to maximise the contribution of the directors. The company secretary ensures suitable opportunities are identified and communicated to directors. During the year the directors have undertaken training via an audit committee workshop and remuneration committee debate. The Board also receives regular updates from the company secretary on legal, regulatory and governance developments, which highlight any impact they may have on the Board and/or the Group. On joining the Board, directors take part in a formal induction process. This includes the provision of past Board materials to provide background information on the Group, information on Board processes and governance, site visits and meetings with key employees. The induction is tailored to each new director s specific needs. Allister Langlands and Thomas Leppert are participating in comprehensive induction programmes, which commenced immediately following the announcement of their appointments. James Cullens will receive a similar introduction to the Group on commencement of his appointment. Strategic Report Accountability Financial reporting Statements regarding directors responsibilities and the status of the business as a going concern are given in the Directors Report (pages 64 and 65). Internal controls The Board is responsible for reviewing and approving the Group s governance framework and ensuring its adequacy and effectiveness, as set out in the FRC s 2005 Internal Control: Revised Guidance for Directors on the Combined Code. Changes in this area following consultations by the FRC are being monitored by the Board and its committees as applicable. Work to develop our Group code of conduct continued during the year and this is expected to be launched to all employees in the current financial year. It sets out what it means to think and behave in the Atkins Way and provides employees with a clear framework within which to operate. The Group s governance framework is illustrated in figure 1. Figure 1: framework Level and example inputs Framework Assurance Board Articles of association Matters reserved to the Board Committee terms of reference Values and ethics Group Strategy Quarterly business reviews Group authority matrix Service delivery process Design principles Support function manuals (e.g. finance, human resources, QSE) Region/business Local legislation Industry requirements Budgets Systems Project controls Win work Board Policy statements Group controls Business management system (BMS) Deliver work Business operations Code of conduct People Reporting, audit, risk management Financial Statements Corporate Information

74 72 Corporate Report continued The governance framework reflects the devolved and decentralised structure of the Group, which is considered a key part of the Group s ability to deliver services to its clients. Under this structure the Board has delegated operational responsibility to the chief executive officer, who then delegates authority and control to the regional chief executive officers (who are all members of the SLT and OLT). Authority is further delegated from them to the managing directors of the principal businesses and then downward to business and project managers as appropriate. This approach is reflected in the governance framework as follows: the policy statements approved by the Board, available on our website: policy-and-governance, set out clearly and succinctly Atkins vision, commitment and arrangements, including: business conduct, risk management, employment, excellence in delivery, health, safety and security, sustainability and stakeholder communication Group controls set out mandatory activities and standards that are part of the overall Group processes and apply across the Group the code of conduct will set out behavioural expectations for everyone who works for and represents Atkins, the purpose being to reinforce the controls and underpin the ethics and values that apply across the Group, thereby protecting the reputation of our business and maintaining our professional standing and brand each BMS (as adopted by each region/business) has been reviewed and updated to ensure it incorporates all Group controls and any regional and industry-specific controls required to deliver our four key business processes win work, deliver work, people and business operations with each BMS providing a single source of information for employees, enabling them to understand their responsibilities and comply with all Atkins requirements. The following principles are key to the successful operation of the framework: authority is delegated within clearly prescribed limits (under the Group s authority matrix) decisions are escalated where either project size or risk profile require a higher level of authority activity and performance are tracked through monthly and quarterly reports effectiveness is audited via internal audit and self-assessment reviews. The governance framework is designed to manage, rather than eliminate, the risk of failure to achieve stated business objectives. It can only provide reasonable and not absolute assurance against material misstatement or loss. Joint ventures in which the Company does not have overall control are not covered by the Group s governance framework. For these joint ventures, systems of internal control are applied as agreed between the joint venture parties but as far as possible we insist on compliance with our governance requirements as a minimum. The Board monitored and reviewed the adequacy and effectiveness of the Group s governance framework, including internal controls and risk management, on a continuous basis throughout the year ended 31 March and up to the date of approval of the Annual Report. Support was provided by the Group Risk Committee, the internal audit function and the Company s independent auditor. Audit Committee Details of the work of the Audit Committee can be found in the Audit Committee Report (pages 76 to 80). Remuneration Details of the directors remuneration and the work of the Remuneration Committee can be found in the Remuneration Report (pages 81 to 105). Relations with shareholders Engagement with our shareholders is a fundamental part of the Group s corporate governance model. To this end we seek to establish an early and effective dialogue with shareholders regarding significant changes that affect corporate governance, in addition to ongoing engagement on more routine matters. Communication regarding the delivery of the Group s strategy is integral to this ongoing dialogue. The primary means used by the Board for communicating with all Company shareholders are the Annual Report and Accounts, preliminary statement of annual results, half year results and the AGM. It also recognises the importance of the internet as a means of communicating widely, quickly and cost-effectively. An investor relations section is provided on the Group s website: to facilitate communications with institutional and private investors. This includes material shared with fund managers and analysts at Company meetings.

75 73 Corporate Report continued Our shareholders play a vital role in the Group s governance and their increasingly active engagement is welcomed. The investor relations director, alongside the chief executive officer, Group finance director and chairman, provides a focal point for communication with investors and is always keen to engage with, educate and inform potential new investors. The Group s approach to investor relations enables it to be proactive in its engagement with both shareholders and non-shareholders. The chief executive officer and Group finance director present the preliminary statement of annual results and half year results to institutional investors and analysts. These presentations are also available via webcast and teleconference. Analyst breakfast events are hosted regularly which include presentations by our regional chief executives and business managing directors. In the last financial year they have focused on our Asia Pacific business and opportunities in the global rail market. The chief executive officer, Group finance director and investor relations director also regularly attend conferences and roadshows to give shareholders, and other potential investors, access to management. The non-executive directors receive updates on the views of shareholders from the executive directors following investor meetings. The Group s broker also provides updates to the Board on shareholder opinions and compiles independent feedback from investor meetings twice a year. The company secretary brings to the attention of the Board any material matters of concern raised by the Company s shareholders, including private investors. Retail shareholders have the opportunity to attend our AGM, where all directors are expected to be available to answer questions. They are also able to submit questions in writing at any time. All of the directors in appointment at the time attended our AGM in July and were available to speak to shareholders. We intend to call a poll for all resolutions to be considered at the AGM. This ensures the Company continues to follow best practice and allows all shareholders, present in person or by proxy, to vote on all resolutions in proportion to their shareholding. Details of the AGM are set out in the separate Notice of Meeting. Strategic Report Approved by the Board and signed on its behalf by Allan Cook Chairman 11 June Corporate Information Financial Statements

76 74 Nomination Committee Report The Nomination Committee Information regarding the role of the Nomination Committee, including its terms of reference, can be found on the Group s website: Committee membership The independent non-executive directors who served on the Committee during the year are shown in table 1. Table 1: Members of the Committee Member From To Admiral the Lord Boyce 5 May July Allan Cook (chairman) 10 September 2009 To date Fiona Clutterbuck 20 June 2007 To date Joanne Curin 1 March January Allister Langlands 4 September To date Thomas Leppert 1 October To date Raj Rajagopal 1 March 2009 To date Rodney Slater 9 September 2011 To date The key matters discussed by the Committee during the financial year included: Theme Agenda items Succession planning Executive and non-executive directors Board and committee appointments Board and committee memberships Recommendation to the Board regarding appointment of two new non-executive directors and an executive director Re-election of directors in accordance with the Company s articles of association Board composition The Board s composition is regularly reviewed and, where necessary, updated to ensure that it is able to respond to the Group s needs. As the Group continues to grow, and as we move into the new financial year, our refreshed Board is well placed to provide effective leadership. Appointment process Allister Langlands and Thomas Leppert were appointed to the Board as independent non-executive directors during the last financial year. James Cullens will be joining as an executive director on 1 July and, after one month s handover, will take over as Group HR director. At the beginning of each appointment process, the Nomination Committee considered in detail which areas of expertise the Board, and in turn the Group, would most benefit from and drew up detailed role specifications accordingly. Diversity of thought and background played a considerable part in the process. Each candidate was assessed against the role specification as well as undergoing a comprehensive interview process. Gender diversity was an important part of the appointment process. We mandated that balanced shortlists be presented for these appointments and will do so for future searches for independent non-executive directors. The executive search firm Korn/Ferry Whitehead Mann supported the Board on all the appointments during the year. We are pleased that it has signed up to the Voluntary Code of Conduct for Executive Search Firms, which promotes gender diversity and best practice for corporate board search processes. Succession planning Considerable effort has been put into developing talent below Board level, notably through the introduction of a Group leadership development programme (GLDP) in the year ended 31 March. Several members of the Board joined attendees during the GLDP in the summer of. Members of the Committee participated in a comprehensive review of the Group s succession plan at a meeting of the Board held during the year. Gender imbalance below Board level is widely recognised as a potential factor in gender imbalance at Board level. The Company has sought to address this through various initiatives, as set out in the Human Resources Review (page 52). As part of the succession planning exercise, a number of female employees have been identified as potential future leaders of the Group. It is hoped this will create a pipeline of senior female talent in both management and technical roles. Furthermore, we have engaged actively with an initiative promoted by the Department for Business, Innovation & Skills (BIS), to identify female senior employees to become potential candidates for non-executive director roles in other listed companies.

77 75 Nomination Committee Report continued Board and employee diversity The Board attaches significant importance to diversity both within its own membership and within the Group. Atkins benefits from diversity at Board level in terms of both perspective and experience. In particular, the Board remains committed to gender diversity. The topic of women s representation on boards remains high on the agenda for governments and the public. In March Lord Davies of Abersoch published his third annual progress report on this matter. In it he renews his calls for chairmen to set out their aspirational targets for the number of women on their boards in 2015 or beyond and for companies to invest in the female talent pipeline. The Board continues to aspire to a membership of at least one third women by 2015, without compromising its focus on diversity of thought and experience. In the wider Group, we are continuing to work towards our short-term target of increasing female representation in both the senior management population (the top 1,000 employees in the Group) and the SLT to 15% by 31 March Details of female representation in the wider Group are provided in the Human Resources Review (page 53). Strategic Report The Board s current diversity as at 31 March is shown in table 2 below. Table 2: Board diversity Board experience and composition Percentage of Board membership Board overall 100% Nationality/citizenship Defence and aerospace 22.2% Energy 22.2% Engineering 44.4% Finance (accountancy, private equity and corporate finance) 44.4% Human resources 11.1% Legal 22.2% Management consultancy/ strategic consultancy 44.4% Financial Statements Not for profit, educational and public entities 33.3% Other global multinational boards 66.6% Transportation 11.1% Approved by the Board and signed on its behalf by Allan Cook Chairman 11 June Corporate Information

78 76 Audit Committee Report Letter from the Audit Committee chairman Dear Shareholder Following my appointment as chairman of the Audit Committee from 1 February, I am delighted to present the Audit Committee Report for the financial year ended 31 March. My fellow Committee members and I would like to thank Joanne Curin, who retired from the Board in January this year, for her stewardship of the Committee since 1 July Her guidance and insights have proved invaluable as we carry the Committee s work forward in a changing regulatory environment. The role of the Committee continues to evolve. We have clear terms of reference and specific duties to perform but our main purpose is to give assurance that shareholders interests are being properly protected by appropriate financial management and reporting and internal control frameworks. We aim at all times to provide oversight and guidance which will contribute to the ongoing good governance of the business. The UK Corporate Code (the Code) has been revised to incorporate a number of new disclosures in relation to the work of audit committees. We welcome these developments, which are designed to provide shareholders with more information of relevance to the Company and to enhance transparency. We have therefore prepared this report in compliance with the Code s new requirements and the report addresses the Committee s consideration of significant issues during the financial year, our assessment of external audit effectiveness and our approach to appointing the auditor. Independent auditor Regulatory and best practice developments regarding the appointment, role and responsibilities of the independent auditor remain subject to further discussion and potential change. We have considered the Code provision that the independent audit contract be put out to tender every 10 years. However, comprehensive regulatory changes have also now been proposed by the European Union (EU) and the UK s Competition Commission, which has since been abolished and had its powers transferred to the Competition and Markets Authority (CMA). We therefore believe that our long-term tender policy should be based on the final outcome of these developments taken as a whole. These issues are discussed further later in this report (page 78). In the meantime the reappointment of the independent auditor continues to be the subject of rigorous review each year. Having considered the effectiveness and performance of the independent auditor, the Committee has recommended the reappointment of PricewaterhouseCoopers LLP (PwC) as independent auditor. Yours faithfully Allister Langlands Chairman of the Audit Committee 11 June Internal auditor Last year we reported the Committee s satisfaction with the development of the internal audit function since the appointment in 2010 of Ernst & Young (EY) to provide these services to the Group. We have continued to benefit from EY s ability to scale resource and deploy specialists where necessary.

79 77 Audit Committee Report continued The Audit Committee The independent non-executive directors who served on the Committee during the year are shown in table 1. Table 1: Members of the Committee during the year Member From To Joanne Curin (chairman 1 July 2009 to 31 January ) 1 March January Fiona Clutterbuck 1 April 2007 To date Allister Langlands (chairman from 1 February ) 9 October To date Raj Rajagopal 8 September 2011 To date Information regarding the scope of the Committee s activities, including its terms of reference, can be found on the Group s website: Committee activities The key matters discussed by the Audit Committee during the financial year included: Theme Agenda items Financial reporting Judgemental issues regarding the results for the year ended 31 March including a review of accounting policies and going concern Independent auditor s report in respect of the results for the year ended 31 March Draft results and associated documentation for the year ended 31 March Plans for the preparation of the results for the six months ended 30 September Judgemental issues regarding the results for the six months ended 30 September including a review of going concern Independent auditor s report in respect of the results for the six months ended 30 September Draft half year results and associated documentation for the six months ended 30 September Plans for the preparation of the full year results for the year ended 31 March Internal controls Review of key internal controls Group self-certification process and statement Review of the whistleblower and fraud response policies and processes Reports on whistleblower confidential hotline activity Approval of amendments to the Group tax and treasury requirements Consideration of the role of the senior accounting officer and the statements required to be filed Internal audit Consideration and approval of the internal audit plan for the year ending 31 March 2015 Regular reviews of internal audit findings Review of the policy regarding the management of potential conflicts between the Group and the internal auditor Review of the Group s Internal Audit Charter Strategic Report Financial Statements Independent auditor Risk Independent review plans for the six months to 30 September and for the year ended 31 March Review of the policy regarding the management of potential conflicts between the Group and the independent auditor, including non-audit work undertaken by the independent auditor Review of audit and non-audit fees paid to the independent auditor and its independence and effectiveness Recommendation regarding the reappointment of the independent auditor Approval in line with policy of non-audit work undertaken by the independent auditor Reform of the audit market and the proposals from the EU and the UK s Competition Commission (now the CMA) Consideration of the Company s approach to tendering the independent audit Annual review of the activities of the Group Risk Committee Corporate Information Consideration of changes to corporate reporting requirements Consideration of the effect of the implementation of amended accounting standards

80 78 Audit Committee Report continued The Committee discussed the following matters following the conclusion of the financial year ended 31 March in respect of that year: judgemental issues regarding the results for the year ended 31 March including a review of accounting policies and going concern advising the Board, at its request, on whether the Annual Report and Accounts for the year ended 31 March are fair, balanced and understandable independent auditor s report in respect of the results for the year ended 31 March draft results and associated documentation for the year ended 31 March. Annual financial reporting Significant issues The Audit Committee has reviewed the key judgements applied to a number of significant issues in the preparation of the Consolidated Financial Statements. This review included consideration of the following: Significant issue How the Committee addressed this Contract accounting/ revenue recognition Goodwill impairment The Group enters into a number of large and complex long-term contracts. Significant judgements are required to forecast how each contract will perform and potential adjustments that may prove necessary over the lifetime of a project. These judgements may include, for example, revenue and profit recognition being determined based on management s estimates of the percentage that has been completed and the costs that will need to be incurred to complete it, as well as contractual variations. The Committee has received regular reports from management on a number of higher risk contracts and has challenged estimates of completion costs, with consequential impacts on revenue recognition. It has concluded that the approach to revenue recognition is appropriate in the context of the Group s business model and contract structures. The Group has significant goodwill relating to Atkins North America (ANA) following the acquisition of The PBSJ Corporation in The Committee considered the need to undertake a goodwill impairment calculation as at 30 September by reviewing the assumptions used at 31 March and the discount rate used in relation to future cash flows and determined that there were no triggering events. At 31 March it examined the detailed full impairment review undertaken by management, which included testing of assumptions and sensitivity analysis. It also received and considered the independent auditor s comments on the key assumptions and detailed forecasts made. The issue of impairment involves making significant judgements about the future results of the ANA business and the risks it faces. The Committee agreed with management s recommendation that no impairment charge should be made but that there remains a risk of impairment of ANA goodwill in the future and relevant disclosures have therefore been included in the Annual Report and Accounts (note 16, page 148). The Committee also considered a number of other judgements made by management, including judgements concerning accounting for acquisitions and disposals, provisions in the Group s insurance captive, accounting for pension liabilities and taxation. Fair, balanced and understandable The Audit Committee examined the Annual Report and Accounts and was asked by the Board to advise it on whether they are fair, balanced and understandable. To enable it to draw its conclusions in this respect, the Committee: examined the preparation and review process for the Annual Report and Accounts and considered the level of challenge provided through that process considered the accounting policies applied by the Group assessed the information contained in the Annual Report and Accounts against the Group s strategy and business model to ensure the information provided was sufficient to enable shareholders to assess the Group s performance.

81 79 Audit Committee Report continued Independent auditor The independent auditor is currently PwC, which has acted in this capacity since the Company listed on the London Stock Exchange in During the year the Committee conducted a review of the relationship with the independent auditor, as well as its qualification, expertise and resources and the effectiveness and quality of the audit. As part of this review, the Committee considers audit governance, audit planning and methodology, robustness of challenge to management and the quality of senior members of the audit team. It does so in consultation with senior management, particularly senior finance personnel. It has concluded that PwC s appointment continues to meet the Group s needs and therefore recommended to the Board its reappointment as independent auditor. The Committee has agreed to implement a more formal process of review of the effectiveness of the independent auditor in future. The Committee will issue a questionnaire to the members of the Committee and senior management, which will be circulated after the publication of the Annual Report and Accounts for the year ended 31 March. The questionnaire will cover the robustness of the audit process, quality of deliverables, reporting and the audit team. The responses will be collated ahead of and fed into the Committee s consideration of the audit strategy and approach for the financial year ending 31 March The independence of the independent auditor is evidenced through its challenge to management. Its independence and objectivity are assured through the rotation of the audit partner on a regular basis, the last such rotation having taken place in Accordingly, the Committee has not considered it necessary to date to undertake a tender process for the audit work, although it has considered PwC s tenure and appointment on an annual basis. There are no contractual obligations restricting the Company s choice of independent auditor. Audit tender policy In September 2012 the Financial Reporting Council (FRC) amended the Code to include, among other changes, a requirement for FTSE 350 companies to put the independent audit contract out to tender at least once every 10 years. The FRC recognised that the audit market could be disrupted if a large number of companies chose to go out to tender in the first year in which the revised Code applied and hence proposed transitional arrangements that brought tenders in line with the cycle for rotating the audit partner. Strategic Report The Competition Commission (now the CMA) issued its final report on its inquiry into the FTSE 350 audit market in October. Its recommendations, which are yet to be enacted into law, included a mandatory audit tender once every 10 years, among other proposals intended to encourage competition. In addition to the Code and Competition Commission developments, on 27 May the European Parliament published a directive and a regulation in the Official Journal of the EU implementing reforms of the audit sector in the EU. EU member states must adopt the necessary measures to implement the directive by 17 June 2016 while the regulation will apply from 17 June 2016 (other than the prohibition on contractual clauses limiting the choice of auditor, which will apply from 17 June 2017). The reforms require audit firms of public interest entities, including all listed companies, to rotate their auditor once every 10 years (with a possible extension for a further 10 years available where a tender is held) and introduce a range of new rules and measures to strengthen audit quality and independence across the EU. It is not yet clear what impact the EU changes will have on the Competition Commission recommendations and on the Code or how the various requirements will interact. The Committee will therefore continue to monitor developments and will put in place a formal audit tender policy when the position has become clearer. In the meantime the reappointment of the independent auditor will continue to be the subject of rigorous review each year. Financial Statements Corporate Information

82 80 Audit Committee Report continued Auditor independence The Committee understands that certain work of a non-audit nature may be best undertaken by the independent auditor as a result of its unique position and knowledge of key areas of the Company. Approval is required prior to the independent auditor commencing non-audit work in accordance with a Group policy, summarised in table 2. This policy is drafted to preserve the independence and objectivity of the independent auditor and is reviewed and approved annually by the Committee. The impact on independence, if any, of non-audit work performed by the independent auditor is also considered regularly by the Committee. The policy sets out safeguards to be considered when engaging the independent auditor for non-audit services. The appointment of former employees of the independent auditor to positions in the Group is also regulated by the Committee. Table 2: Policy on non-audit services provided by the independent auditor Examples of types of work Approval required Audit-related services Regulatory work Reporting accountants to a share or bond issue or other shareholder circulars Auditing of share schemes Independent review of the half year report Work best performed by the independent auditor as a result of its unique position and knowledge of the Company Taxation advice Assisting and working with the internal audit function Forensic work Internal audit services under the instruction of the internal audit function Valuation services not material to the financial statements (and where there is not a high degree of subjectivity) Executive management (via the Group finance director and company secretary) has delegated authority to use the independent auditor without prior consultation with the Committee (although the nature of, and fees associated with, that work will be regularly reported to the Committee). The independent auditor s audit partner also has to approve any such engagement before it can proceed. Other work Provision of non-material systems or project services under the control of a Group project manager Secondment of staff other than to prepare accounting records or financial statements Remuneration surveys Systems recommendation and implementation Following a supplier review, if management does identify the independent auditor as being the best supplier in a specific field and also believes that such an assignment does not run the risk of prejudicing its independence, then an evaluated request will be made to the Committee to confirm the appointment. Appointments for non-material fee levels may be approved by the Group finance director (or company secretary in his absence). The independent auditor s audit partner also has to approve any such engagement before it can proceed. Prohibited work Book-keeping services Other services deemed to be incompatible with auditor independence by professional or governmental regulations Note 5 to the Financial Statements (page 139) sets out the fees paid to the independent auditor for audit and non-audit work. Approximately 90% of the non-audit fees incurred related to taxation advice and it was therefore considered appropriate, in light of PwC s detailed understanding of the Group and expertise in this area, to engage its services in this regard. The Committee concluded that the level of non-audit fees, which represent a value of 66.7% of the audit and audit-related fees for the Group, did not have any impact upon PwC s independence. Approved by the Board and signed on its behalf by Allister Langlands Chairman of the Audit Committee 11 June n/a

83 81 Remuneration Report Letter from the Remuneration Committee chairman Dear Shareholder I am pleased to present the annual report on directors remuneration. This report is divided into two sections in accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations (the Regulations): a policy report which sets out our approach to remuneration, and a remuneration report which details what has been paid to directors during the year ended 31 March. Each report will be subject to a separate vote at our forthcoming annual general meeting (AGM). Responding to change Since I last reported to shareholders on the work of the Committee, there has been a significant amount of change to the regulations concerning directors remuneration disclosure. Many of you will be aware of the debate and stakeholder consultation which took place ahead of these changes being implemented. Members of the Committee followed this debate closely and we have sought to respond to the new requirements comprehensively, building on the extensive remuneration disclosures we have made for the past two years. We are conscious that best practice will continue to evolve and the Committee will continue to monitor this, responding to change as appropriate. Overview of our remuneration framework The primary aim of the Committee is to align our remuneration framework with business strategy, calibrated to pay for performance. Strategic alignment Our remuneration framework seeks to: reinforce business strategy provide the right balance between short- and long-term incentives align senior management remuneration with that of the executive directors recognise that we operate a people business, where reward and incentive structures are critical to our success. It is within this framework that we seek to pay for performance. Paying for performance We believe that our remuneration framework has created a clear link between the performance of the Group, the creation of shareholder value and the remuneration of our executive directors. This is achieved through the appropriate selection of performance measures and careful calibration of performance targets. In the past year the Group has delivered another set of good results. The Group also made significant progress on the delivery of its strategy. The Group s profit after tax for the year of 96.3m ( restated: 84.3m) exceeded the stretch target for bonus purposes. Group cash performance was also strong, with the cash conversion target for the year being met in full. Accordingly, the Committee has paid the maximum level of bonus to the executive directors for achieving the stretching financial targets that were set. The Committee also considered the performance of each of the executive directors against their key strategic objectives for the year, full details of which are contained in the Annual Remuneration Report on (page 98). The three-year performance condition attached to the 2011 LTIP awards ended on 31 March. The Company EPS target was met in part and the relative TSR target was met in full. As a result 68.7% of the awards made will vest. Ongoing dialogue Last year, 85% of our shareholders voted in favour of the remuneration report including all 10 of the Company s largest shareholders. The majority of those who voted against followed a voting recommendation from the proxy voting agency Institutional Shareholder Services (ISS) whose primary concern related to the LGU. With this in mind, it is worth recapping on why the Committee first introduced this long-term incentive plan. While our LTIP focuses executives on achieving strong earnings per share (EPS) growth over a three-year period, the LGU provides a direct link between remuneration and sustainable long-term increases in share price. Awards vest over a longer time frame than the LTIP and most conventional long-term incentives. In addition, the Committee is resolute that share price performance must be suitably underpinned by appropriate financial performance. As a consequence, the Committee will explicitly consider prior to the vesting of each tranche the Group s progress against key quantifiable strategic measures. Following last year s AGM we met again with ISS to explore its concerns regarding the LGU. In response we have increased our disclosure surrounding the LGU and address more explicitly the strategic measures which will be considered by the Committee prior to vesting (pages 87 and 100). Dr Raj Rajagopal Chairman of the Remuneration Committee 11 June Corporate Information Financial Statements Strategic Report

84 82 Remuneration Report continued Committee activities The Committee uses a schedule of standing items to help structure the agendas for its meetings as well as responding to matters which arise during the course of the year, such as regulatory changes. The Committee s standing agenda items are aligned to the Group s reward communication programme. Each April employees receive confirmation of their remuneration for the year ahead. Notification of bonus payments follows the announcement of the Group s financial results in June. The Committee keeps remuneration policy and market practice under review throughout the year. The key matters discussed during the year are set out in figure 1. Figure 1: Key matters discussed during the year Theme Agenda items Best practice Consideration of latest remuneration best practice guidance Review of the remuneration advisor s fees Consideration of revised terms of reference Institutional shareholder and proxy advisor engagement in relation to the directors remuneration report for 2012/13 Review of the Committee s remuneration advisor and the subsequent appointment of Towers Watson Remuneration policy Directors and company secretary s remuneration Employee remuneration (including senior management) Share plans Formal articulation and development of areas of the remuneration policy in response to the Regulations Consideration and approval of bonus scheme payments to the executive directors for 2012/13 Consideration of executive directors salaries Consideration of James Cullens remuneration Interim review of executive directors performance against personal performance targets for /14 Consideration and approval of the personal key performance targets for the executive directors in connection with their bonuses for /15 Consideration and approval of remuneration, bonus principles and quantum for the executive directors and company secretary for /15 Consideration and approval of the chairman s fee for /15 Remuneration for Group employees Review of bonus scheme payments to the senior leadership team in light of wider remuneration of Group staff for 2012/13 Consideration of /14 cash conversion targets for senior management under the annual bonus scheme Review of proposed remuneration and bonus opportunity for the senior leadership team for /15 Consideration and approval of performance condition outturn in respect of LTIP awards made during 2010 Consideration and approval of LTIP and LGU awards Review of share plan hedging arrangements and dilution Consideration and approval of share plan awards Performance monitoring of LTIP awards Consideration of EBS structure and financial targets for /15 Approval of non-material share plan rule changes Reporting Annual review of executive directors shareholdings and expenses for 2012/13 Annual review of the chairman s expenses for 2012/13 Consideration and approval of the remuneration report for 2012/13 Further details on the Committee can be found in the Annual Remuneration Report (pages 104 and 105).

85 Remuneration Report Directors Remuneration Policy 83 This section of the report summarises the Company s policy on directors remuneration and includes the following parts: A. an overview of our remuneration policy and its alignment with our business strategy B. a future policy table detailing key remuneration elements for our executive directors C. an illustration of the remuneration packages for each executive director under minimum, target and stretch performance scenarios D. other relevant policies relating to executive directors remuneration, including on recruitment and termination E. details of the remuneration policy for the chairman and non-executive directors F. other matters considered when determining remuneration policy for directors. This policy will be put to shareholders for a binding vote at the Company s AGM to be held on 30 July. This policy is intended to last for three years and will take effect from the AGM, subject to shareholder approval. A. Alignment with our strategy Our strategy is to deliver long-term shareholder value through a focus on core growth sectors in engineering and design. As set out in the Strategy section (pages 16 to 17), this strategy has three principal priorities over the medium term: operational excellence portfolio optimisation sector and regional focus. The overall objective of our strategy remains to create shareholder value through: driving margins above 8% reducing dependence on the UK (with our long-term aspiration being to have more than 75% of our business outside the UK) growing organically and through acquisition. Our remuneration policy is directly aligned with the delivery of our strategy. The following key themes provide the basis for the framework: as a people business, the remuneration policy must enable us to attract, retain and incentivise the best global talent the policy must be based on simple principles, aligned with our key performance indicators (page 20), and provide clear line of sight for participants and alignment with shareholders interests a significant portion of executive directors remuneration should be performance-related (on both a short- and long-term basis) and delivered in the form of Atkins shares growth in EPS is a key metric for measuring the performance of our business and should be balanced with a focus on long-term share price growth and delivery of our strategy. Strategic Report Financial Statements Corporate Information Related section Our strategy Find out more about our strategy on page 16

86 84 Remuneration Report continued Directors Remuneration Policy Figure 2 provides a timeline for the receipt of remuneration. Figure 2: Timeline for receipt of remuneration Element of remuneration Current year (Y) Y + 1 year Y + 2 years Y+ 3 years Y + 4 years Y + 5 years Y + 6 years Salary 100% cash Pension 100% cash Benefits 100% cash Bonus Performance assessed 2/3 paid in cash 1/3 deferred for three years Deferred shares vest LTIP Award made Performance period Award vests LGU Award made Performance period Tranche 1 (1/3) vests Performance period Tranche 2 (1/3) vests Performance period Tranche 3 (1/3) vests

87 85 Remuneration Report continued Directors Remuneration Policy B. Future policy for executive directors Table 1: Future policy for executive directors Fixed pay Purpose and link to our strategy Operation Maximum opportunity Performance framework Base salary Pension Benefits To provide a market-competitive salary to recruit and retain individuals with the skills and experience necessary to deliver the Company s strategic objectives. Paid monthly in arrears in cash. Reviewed annually with any increase effective from 1 April. May be reviewed on an exceptional basis during the financial year with any changes effective from 1 October. A review does not automatically give rise to an increase in salary. Benchmarked periodically against published salary data for companies of similar size and complexity and against bespoke comparator groups. Considered in light of economic climate, market conditions, Company performance, pay and conditions across the wider workforce, geographic footprint of operations, the individual s role, skills, and remit, and the level of salary increases made in the rest of the business. No recovery provisions apply to salary. Salary increases will normally not exceed average salary increases across the Group. Increases above this level may be made in specific situations, such as progression and development in the role, material changes to the business, remit or responsibilities and internal promotion. In any event, any increase in salary to a current executive director will not exceed the competitive market range. In the event of the promotion of an existing executive director, for example the finance director becoming chief executive, the salary increase of the relevant executive director will not exceed the salary of the outgoing director holding that office. When determining salary increases the Committee considers Company and individual performance. To provide a market-competitive remuneration package that enables executive directors to provide for their retirement in a tax-efficient way. Monthly payments into a defined contribution plan or cash allowance in lieu of a pension contribution. No recovery provisions apply to pension. The maximum Company contribution is up to 25% of base salary. The Committee may change the directors pension arrangements in response to new legislation or regulations provided that any changes are cost-neutral. Not applicable To provide a market-competitive remuneration package in a cost effective way. Benefits, which are subject to regular review to ensure competiveness, include: an annual cash car allowance or car life assurance ranging between four and seven times salary private medical insurance or an allowance for executive directors and their families medical assessments income protection in the event that an executive is unable to work due to long-term ill health personal accident cover travel allowances and expense reimbursement professional advice professional subscriptions reimbursement of unused annual leave entitlements reimbursement of taxable expenses incurred on Company matters flexible leave scheme. No recovery provisions apply to benefits. The Committee reserves the power to deliver benefits which, in aggregate, have a cost of 25% of salary. In certain circumstances it may be necessary to exceed this limit, including (but not limited to) where there are changes in the underlying benefits provided, changes to benefit providers and changes in individual circumstances (such as health status). Not applicable Corporate Information Financial Statements Strategic Report

88 86 Remuneration Report continued Directors Remuneration Policy Variable pay Purpose and link to our strategy Operation Maximum opportunity Performance framework Executive Bonus Scheme (EBS) To incentivise and reward the delivery of stretching annual financial performance targets and key strategic objectives. A bonus scheme which operates annually. Two thirds of the bonus is paid in cash and one third is deferred into shares over three years subject to continued employment. The deferral into shares is usually structured as a nil-cost share option. Following vesting, the option can be exercised at the discretion of the participant up to the tenth anniversary of grant. Dividend equivalents accrue on the deferred shares and are payable in cash following the vesting and exercise of the nil-cost share option. Annual bonuses do not form part of pensionable earnings and are non-contractual. Measures and performance targets are set by the Committee at the beginning of each financial year with payout determined after year end following the Committee s assessment of performance relative to targets and objectives. The Committee may reduce the amounts paid if there has been a material quality, safety or environmental failure. The shares are subject to malus provisions which allow the Committee to reduce the award in certain circumstances set out in the notes to the policy table. The current maximum annual bonus opportunity is 125% of base salary for the chief executive officer and 100% of salary for other executive directors. Base salary is the average salary paid to the executive director for the bonus year. The Committee has the discretion to increase the overall maximum bonus level to 150% of salary for the chief executive and 125% for other executive directors, subject to this not being above the competitive market range. The Committee would consult with the Company s major shareholders in advance of any increase in maximum bonus. Annual bonus will normally be subject to Group financial targets (75% of total bonus) and individual or non-financial strategic objectives (25% of total bonus). Individual objectives will be directly linked to strategic priorities which may be functional or operational. Assessment, where not quantifiable, is based on judgement and is subject to a rigorous review by the Committee, both at the time objectives are set, during the financial year and at the year end when final performance is assessed. Any amounts due on this component are also subject to achieving a threshold Group financial target. In assessing the formulaic outcomes of targets, the Committee can make adjustments to ensure that any resulting payment is fair to both the executive director and investors, including the ability to make no payment if deemed appropriate. Long-Term Incentive Plan (LTIP) To incentivise and reward the creation of long-term shareholder value based on the delivery of growth in earnings per share (EPS). An award is made on an annual basis with vesting conditional upon performance and continued employment over a three-year period. Awards are typically structured as nil-cost options. Following vesting, the options can be exercised at the discretion of the participant up to the tenth anniversary of grant. Dividend equivalents accrue on the deferred shares and are payable in cash following the vesting and exercise of the nil-cost share option. The shares are subject to malus provisions which allow the Committee to reduce the award in certain circumstances set out in the notes to the policy table. The maximum annual award limit is 150% of salary. It is not normally expected that awards will exceed 100% of salary. In any year that an LGU award is made, awards will be capped at 75% of base salary. Vesting is subject to a stretching growth target in absolute EPS. This is considered the primary metric for measuring the delivery of our growth objective over the medium and long-term. In determining the level of vesting, the Committee will give consideration to: (1) cash conversion over the performance period to ensure that the achieved EPS growth has been suitably underpinned by cash generation; (2) the impact of any significant acquisitions in the performance period; (3) the impact of inflation during the performance period if it is deemed that this has had a significant impact on the level of challenge presented by the targets. In considering these factors the Committee may reduce the level of vesting.

89 87 Remuneration Report continued Directors Remuneration Policy Variable pay continued Long-term Growth Unit plan (LGU) Purpose and link to our strategy Operation Maximum opportunity Performance framework To provide direct alignment with shareholders interests through sustained share price growth over the long-term (four to six years) and delivery against strategy. An award of units is made on an annual basis. The award vests in three equal tranches on the fourth, fifth and sixth anniversaries of grant. Following vesting, the units can be exercised at the discretion of the participant up to the tenth anniversary of grant. On exercise, the value of each unit is equal to the difference between the six-month average share price at exercise and the six-month average share price at grant. The value is normally delivered in the form of Atkins shares. No more than 50% of any award can be exercised in any rolling 12-month period. There is no entitlement to dividends or dividend equivalents. The shares are subject to malus provisions which allow the Committee to reduce the award in certain circumstances set out in the notes to the policy table. The maximum annual award limit is 50% of salary. Value will only be delivered if the Company s share price increases. The vesting of each tranche is subject to the Committee s assessment of the Group s progress against its strategy. Types of areas that would be assessed include margin progression, the geographical split of revenues and growth. The Committee will also determine that share price performance has been suitably underpinned by the underlying financial performance of the Group over the period. All-employee share plans To encourage share ownership across the organisation. Executive directors can participate in the Share Incentive Plan (SIP) and a Save As You Earn Plan (SAYE) (or equivalent global plans) to the extent that such plans are operated. Executive directors will be subject to the same maximums in place for all employees participating in the relevant plan or plans. Not applicable Additional notes to the future policy table Malus provisions under incentive arrangements Deferred shares awarded in connection with the EBS and LTIP and LGU awards are subject to malus provisions which allow the Committee to reduce awards in certain circumstances, including (but not limited to): a material misstatement of the Company s audited results a material downturn in the financial performance of the Company a material failure of risk management by the Company serious reputational damage suffered by the Company the executive director s misconduct. Legacy arrangements under incentive plans Any awards made under legacy incentive plans prior to the approval of the Company s remuneration policy may be paid out subject to the terms of those plans (as originally applied at grant or subsequently amended) and the relevant performance conditions being achieved. LTIP and LGU awards made in the financial years ended 31 March 2012 and 31 March were consistent with the policy outlined in the future policy table. Corporate Information Financial Statements Strategic Report Administrative powers under incentive plans The policy table provides a summary of the incentive plans in the form required by the Regulations. In addition to the operational features described, the Committee retains standard administrative powers such as inviting individuals to participate and determining the structure of an award and deciding whether or not to apply malus provision. These powers, as set out in the rules of the plans, will continue to apply.

90 88 Remuneration Report continued Directors Remuneration Policy Selection of performance measures and target setting The Committee has the flexibility to select performance measures and weightings and set targets annually to ensure continuing alignment with the strategic priorities of the Group. Any significant departure from the current operation of the policy as set out in the Annual Remuneration Report would be discussed in advance with our major shareholders. In selecting performance measures the Committee takes into account the Group s strategic objectives and short- and long-term business priorities. The performance measures selected incentivise and reward the delivery of stretching financial performance and the creation of shareholder value. The performance targets chosen are set in accordance with the Group s operating plan and are reviewed annually to ensure they are sufficiently stretching. In selecting the targets the Committee also takes into account analysts forecasts, economic conditions and the Committee s expectation of performance over the relevant period. Targets and actual performance in relation to them will be disclosed in the annual remuneration report provided that the Committee determines that the information is not considered commercially sensitive. In practice it is anticipated that EBS targets will remain commercially sensitive and so a full description of actual performance and the committee s performance assessment will be disclosed only at such time as the Committee considers they are no longer commercially sensitive. LTIP targets will be disclosed in the remuneration report prior to grant if determined at that time or, if not, in the first report following grant. For LGU awards, a full explanation will be provided on vesting of the performance assessment in the context of the Group s strategic priorities over the period. Remuneration policy for the broader employee population The executive remuneration framework set out in this report follows similar principles to those applied to the Group s senior leadership team (SLT) to ensure the senior management team is rewarded on a consistent basis. Any differences that exist arise either because of local market practice and/or the Committee s assessment of business need and commercial necessity. The principles that underpin our executive remuneration philosophy also cascade throughout the organisation, although quantum will vary and the provision of certain components of remuneration (such as benefits, allowances and long-term incentives) will vary by seniority and geography. Viewpoint, the Group s annual employee staff engagement survey, seeks employee feedback on remuneration. C. Illustration of the sensitivity of the remuneration package to performance The following charts illustrate the packages for the chief executive officer, Group finance director and Group HR director, distinguishing the elements of the package that are performance-related. Three indicative levels of performance are shown: minimum, target and stretch taking into account an assumed level of vesting, as outlined in table 2. Table 2: Minimum, target and stretch Performance level Definition Minimum Fixed pay comprising salary, benefits and pension. No annual bonus or vesting of long-term incentives. Target Fixed pay comprising salary, benefits and pension. Annual bonus payable at 50% of maximum award (i.e. 62.5% of salary for the chief executive officer and 50% of salary for other executive directors). 50% of LTIP award vests (i.e. 37.5% of salary at grant) and 50% of LGU vests, assuming it is worth 33% of the face value on vesting (i.e. 8.3% of salary at grant). Stretch Fixed pay comprising base salary, benefits and pension. Annual bonus payable at maximum level. LTIP and LGU payable in full, assuming the LGU is worth 33% of face value on vesting (i.e. 16.7% of salary at grant). Salary and pension are based on levels to be implemented in the financial year ending 31 March 2015; benefits are based on the actual value level delivered in the year ended 31 March. Given the value of the LGU is dependent on share price growth, it has been valued in a manner consistent with the guidance issued by the GC100 and the Financial Reporting Lab, namely assuming shares are worth 33% of their initial face value. Dividend equivalents have been excluded.

91 89 Remuneration Report continued Directors Remuneration Policy Uwe Krueger James Cullens Minimum % 775 Minimum % 352 Target 55% 26% 19% 1,410 Target 58% 22% 20% 611 Stretch 38% 36% 26% 2,044 Fixed pay Annual bonus Long-term incentives Heath Drewett Stretch 41% 31% 28% Fixed pay Annual bonus Long-term incentives 869 Strategic Report Minimum % 449 Target 58% 22% 20% 781 Stretch 40% 31% 29% 1,113 Fixed pay Annual bonus Long-term incentives D. Other remuneration policies relating to executive directors Share ownership guidelines The Company s shareholding guidelines seek to strengthen further the alignment of the executive directors with shareholders. Executive directors are expected to build up a significant interest in the Company s shares equivalent to one times their individual salaries, based on the value of such shares at the time of their acquisition or their current market value, whichever is the higher. Shares that count towards this guideline include those held by the executive director s spouse and/or dependent children plus any vested shares awarded under a Company share plan. Our share ownership guidelines were adopted on 1 April Executive directors are expected to meet the guideline within a five-year period from 1 April 2012 or, if later, the date of their appointment to the Board. The Committee may vary the length of the periods within which the shareholding may be acquired. Recruitment and appointment of executive directors The Committee determines the remuneration package for all new executive directors appointed to the Board. Such appointees may be individuals who are already employed by the Group or from elsewhere. In determining the appropriate remuneration package for a new executive director the Committee will consider the calibre of the candidate, the level of their existing remuneration, the jurisdiction the candidate is recruited from and their skills and experience, data for companies of a similar size and complexity and contextual information regarding remuneration paid to employees elsewhere in the Group. The remuneration of a new executive director will include all elements set out in the policy table (table 1), namely salary, benefits, pension, participation in the EBS and long-term incentive awards under the LTIP and LGU. Depending on the level of salary set on appointment, the Committee may make larger initial increases to move salary to the desired level during the first three years following appointment. The maximum opportunity levels in relation to other elements of remuneration outlined in the policy table (table 1) will apply. Depending on the timing and circumstances of the appointment, the Committee may vary the weighting of objectives under the EBS in the first year that the individual serves on the Board. For an external appointment the offer may include compensation for the forfeiture of awards from a previous employer. In assessing the level of such a buyout award, the Committee will take into account the type of incentive scheme, performance targets (and whether they are likely to be achieved) and the performance period of the forfeited award. In so doing the Committee will seek to ensure up to equivalence in value. To the extent that the Committee determines that it is appropriate, such awards will be share-based with vesting subject to appropriate performance targets. The Committee reserves the right to rely on exemption of the Listing Rules to enable a buyout award to be made. In such circumstances any arrangement put in place will only compensate for remuneration lost and will take the form of performance-related variable remuneration. For internal promotions, the Committee reserves the right to satisfy pre-existing executive incentive awards and other obligations which may be in place at the time of appointment. Financial Statements Corporate Information

92 90 Remuneration Report continued Directors Remuneration Policy Relocation of executive directors and expatriate assistance In circumstances where an executive is employed on an international assignment, their arrangements will be managed in a way that is consistent with other internationally mobile employees across the Group. International assignment remuneration may incorporate tax equalisation so that, whilst on assignment, the executive director will not have to pay any more tax than they would have paid had they remained in their home location. It is also likely to include additional allowances to reflect any cost of living and lifestyle differences between the assignee s home and assignment locations and support to fund accommodation and schooling (if the executive has dependants of school age). Executive directors contracts The service agreements of executive directors who served during the year are summarised in table 3. Table 3: Executive directors service agreements Notice period (months) Contract date Effective date of contract Unexpired term of contract James Cullens February 1 July Rolling contract Heath Drewett April June 2009 Rolling contract Alun Griffiths April March 2007 Contract ends on 30 July Uwe Krueger 12 1 June June 2011 Rolling contract 1. James Cullens will join the Company on 1 July. 2. Alun Griffiths will retire from the Company on 30 July. Copies of each director s service agreement will be available for inspection prior to and during the AGM and are also available for inspection at the Company s registered office during normal business hours. In setting its policy on notice periods, the Company takes into account market practice and the need to attract and retain the best talent. In line with current market practice, the executive directors have rolling service contracts which are terminable on giving 12 months notice. On the recruitment of an executive director who previously had a longer notice period (commonly seen outside the UK), the Committee reserves the right to mirror the notice period with it reducing on a rolling basis to 12 months within two years of appointment. No service agreement provides for predetermined amounts of compensation in the event of early termination of service contracts or a change in control. The Committee retains its discretion to make a payment in lieu of notice which will be limited to one year s base salary, benefits and pension. The Committee also retains its discretion to make phased payments. The service agreements include a duty for the executive director to mitigate loss and any payment in lieu of notice may be reduced to take account of such mitigation (for example if alternative employment is taken up). There is no contractual obligation to pay annual bonus. Depending on the circumstances, the Committee has the discretion to make a pro rata bonus payment, linked to the original performance conditions and delivered entirely in cash.

93 91 Remuneration Report continued Directors Remuneration Policy The executive directors entitlements to any bonus and unvested share awards granted in connection with the EBS or under the terms of the LTIP and LGU will be treated in accordance with the terms of the relevant plan rules, summarised in table 4. Table 4: Executive directors entitlements to bonus and unvested share awards Agreed termination (e.g. retirement or ill health). Termination for gross misconduct or other grounds of fair dismissal. Termination due to resignation for another role. Corporate event (e.g. change in control, reconstruction, winding-up). Executive Bonus Scheme cash award Award pro-rated subject to performance conditions being satisfied. No entitlement. No entitlement if employment ceases prior to the completion of the performance period. If employment ceases after the completion of the performance period the maximum two-thirds EBS cash may be paid subject to performance conditions being satisfied. Award pro-rated subject to performance conditions being satisfied. Executive Bonus Scheme deferred share award LTIP award LGU award Vested and unvested award exercisable/ transferable within six months of leaving. The entire EBS entitlement will be paid in cash with no deferred share award. Vested award exercisable/ transferable within six months of leaving; unvested award lapses. Vested award exercisable/ transferable within six months of leaving; unvested award lapses. If employment ceases after the completion of the performance period the one-third EBS deferred share award will be forfeited. Vested and unvested awards exercisable/ transferable on corporate event. Unvested award pro-rated and exercisable/transferable within six months from the vesting date subject to satisfaction of performance condition. Vested award exercisable/ transferable within six months of leaving. Vested award exercisable/ transferable within six months of leaving; unvested award lapses. Vested award exercisable/ transferable within six months of leaving; unvested award lapses. Unvested award pro-rated and exercisable/transferable on corporate event if performance condition has been satisfied. Vested award exercisable/ transferable within six months of the corporate event. Unvested award pro-rated and subject to the normal vesting schedule and satisfaction of underpin. Vested award exercisable/ transferable within six months of leaving. Vested units exercisable within six months of leaving. Unvested units lapse. Vested units exercisable within six months of leaving. Unvested units lapse. Unvested award pro-rated and exercisable on corporate event if underpin has been satisfied. Vested award exercisable/ transferable within six months of the corporate event. The Committee reserves the right to make additional compensatory payments where such payments are made in good faith and following the receipt of: (i) the discharge of an existing legal obligation (or by way of damages for breach of such an obligation); and (ii) settlement or compromise of any claim arising in connection with the termination of a director s office or employment. Payment of the leaver s reasonable legal fees will also be permissible. External directorships The Board and the Committee recognise the benefit we can obtain if our executive directors serve as non-executive directors of other companies. Subject to review in each case, the Board s general policy is that each executive director may accept one non-executive directorship with another FTSE 350 company from which any fees received may be retained. The Board also encourages executive directors to undertake pro bono appointments with charitable or professional organisations to aid their personal development and further enhance the profile of the Company. Corporate Information Financial Statements Strategic Report

94 92 Remuneration Report continued Directors Remuneration Policy E. Remuneration policy for the chairman and non-executive directors Remuneration policy Table 5 summarises the remuneration policy for the Company s chairman and non-executive directors. Table 5: Remuneration policy for the Company s chairman and non-executive directors Component of Fixed fees remuneration Purpose and link to strategy Operation Opportunity Performance To attract and retain high-calibre individuals by offering market-competitive fixed fees commensurate with time commitment and responsibilities. Fees All fees are paid in cash in arrears. The chairman is paid a basic fee. The non-executive directors are paid a basic fee and, if applicable, additional fees for chairmanship and membership of the Audit and Remuneration Committees. An additional fee is also paid to the director who serves as the senior independent director. Reviewed annually by the executive directors with any changes effective from 1 April. A review does not automatically give rise to an increase in fees. Benchmarked periodically against published fee data for companies of similar size and complexity and bespoke comparator groups as appropriate to ensure that fees remain market-competitive. Considered in light of economic climate, market conditions, Company performance, pay and conditions across the wider workforce, the non-executive director role, remit and the level of salary increases made in the rest of the business. No recovery provisions apply to fees. Expenses Fees for the chairman are currently inclusive of normal travel expenses for travelling to and from the Group s London office. However, the Committee may pay such expenses in the future. Expenses are payable on all travel and subsistence payments to the non-executive directors and are grossed up where such expenses are deemed to be a taxable benefit by HM Revenue & Customs (HMRC). The Company may also meet the cost of compliance with HMRC s individual reporting requirements where the director is not resident in the UK. The chairman and non-executive directors are not eligible for a pension, share incentives, annual bonus or any similar payments other than out-ofpocket expenses in connection with the performance of their duties. Fee increases for non-executive directors will normally not exceed the average salary increases across the Group. Increases above this level may be made in specific situations, such as significant additional time commitment from non-executive directors in exceptional or unforeseen circumstances. The details and reasoning behind such an exceptional increase will be disclosed in the Annual Remuneration Report. In aggregate, total fees (basic fees plus additional fees) paid to the chairman and non-executive directors shall not exceed 600,000 per annum as set out in the Company s articles of association (as amended with shareholder approval from time to time). When determining fee increases the performance and time commitment of the non-executive directors is considered. Letters of appointment The chairman and non-executive directors have letters of appointment stating their annual fee. Their appointment is for an initial term of three years subject to satisfactory performance and their re-election at forthcoming AGMs. Their appointment may be terminated with six months written notice at any time. There are no entitlements in respect of loss of office. All directors are subject to re-election at the Company s AGM.

95 93 Remuneration Report continued Directors Remuneration Policy Table 6 summarises the dates of appointment and most recent re-election dates for the chairman and each of the non-executive directors. Table 6: Dates of appointment and most recent re-election dates for the chairman and each of the non-executive directors Name of director Date of appointment as a non-executive director Date of last election/ re-election at AGM Expiry of current three-year term Fiona Clutterbuck 13 March July 13 March 2016 Allan Cook 10 September July 10 September 2015 Allister Langlands 4 September n/a 4 September 2016 Thomas Leppert 1 October n/a 1 October 2016 Raj Rajagopal 24 June July 24 June Rodney Slater 9 September July 9 September Strategic Report Copies of letters of appointment of the chairman and non-executive directors will be available for inspection prior to and during the AGM and are also available for inspection at the Company s registered office during normal business hours. Recruitment of chairman and non-executive directors When recruiting a chairman, fees will be set taking into account the calibre of the candidate, the level of existing remuneration, the jurisdiction the candidate is recruited from and the individual s skill and experience. Any new non-executive directors will be paid in accordance with fee levels in place at the time of their appointment. F. Matters considered when determining remuneration policy for directors Remuneration in the context of the wider Group The Committee does not consult formally with employees regarding executive remuneration but regularly reviews the remuneration of employees throughout the Group to ensure that it is attuned to general pay and conditions when considering the remuneration of executive directors. For example, in determining salary increases for the executive directors, the Committee looks at salary increases across the Group. As a people business our reward and incentive structures are critical to the success of our business. Participation in the success of the Group, both through bonus arrangements and, for the SLT, through long-term share-based awards, is a cornerstone of our remuneration framework. The Committee also recognises the importance of having reward structures that create a sense of ownership and participation in the long-term growth of our shares. All UK employees are eligible to participate in the SIP and, at the AGM, we obtained approval for new all-employee share plans in the UK, the US and other major jurisdictions in which the Group operates. As many of the Company s UK-based employees are shareholders through the SIP they, like other shareholders, are able to express their views on directors remuneration at each general meeting via voting on the remuneration resolutions. Consideration of shareholder views in developing policy The Committee regularly consults with shareholders on matters relating to executive remuneration. When significant changes are planned to remuneration, the Committee seeks feedback from investors and develops and considers its proposals in light of this feedback. For example, in determining the new remuneration framework established in 2012/13 the Committee consulted extensively with shareholders. This highlighted the importance of incorporating a cash flow measure in the annual bonus scheme, as this is a key indicator by which the Company and its shareholders measure the performance of the business. In response, a cash conversion target was incorporated in the annual bonus for the executive directors and other senior management from. During we have engaged with Institutional Shareholder Services (ISS) to understand better its concerns with respect to the LGU as expressed in its proxy voting report. These concerns related largely to transparent disclosure of the performance metrics that are taken into account when determining vesting. In response, the Annual Remuneration Report provides more explicit detail of the criteria by which the Committee will assess progress against strategy for the awards made in and, in future years, will give a full explanation of the Committee s decision on whether or not the awards have vested during the year being reported on. Financial Statements Corporate Information More generally, in developing the policy disclosed in this report we have considered the views of our majority shareholders based on published guidance and direct feedback from prior conversations.

96 94 Remuneration Report Annual Remuneration Report This section of the Directors Remuneration Report sets out the Company s remuneration of its executive and non-executive directors (including the chairman) during the financial year ended 31 March and will, together with the annual statement by the Committee chairman, be proposed for an advisory vote by shareholders at the AGM on 30 July. It has been prepared on the basis prescribed in the Regulations and also includes the items required to be disclosed under Listing Rule 9.8.8R. Where required, data has been audited by PricewaterhouseCoopers LLP and this is indicated where appropriate. Relative importance of spend on pay Table 7 sets out total employee costs and distributions to shareholders for the years ended 31 March and 31 March. Table 7: Relative importance of spend on pay 2012/13 /14 % change Total employee costs (including directors) Distributions to shareholders Total employee costs represent amounts included in note 6 to the Financial Statements. 2. Distributions to shareholders include the total dividends paid in respect of each financial year. Percentage change from to in remuneration of director undertaking the role of chief executive officer Table 8 shows the change in remuneration, from to, of the chief executive officer and a comparator group consisting of all UK employees. Table 8: Change in chief executive officer and employee pay from to % change in taxable benefits % change in annual bonus % change in salary Chief executive officer 3.44% -8.44% 7.06% Comparator group % 4.89% 2.97% 1. The comparator group consists of all UK-based employees within the Atkins Group excluding the chief executive officer. This comparator group has been chosen for the purpose of this comparison as the chief executive officer is employed in the UK. Chief executive officer pay for performance comparison over the last five years Figure 3 provides a comparison of the Company s total shareholder return (TSR) with that of the FTSE 250 Index, based on an initial investment of 100 over the five-year period ended 31 March. This index is considered the most appropriate index against which to measure performance as the Company has been a member of the FTSE 250 for the whole of the five-year period. Figure 3: Total shareholder return 400 Notional value of investment Atkins FTSE Source: Datastream Related section Human Resources Review Find out more about our reward for our people on page 51

97 95 Remuneration Report continued Annual Remuneration Report Table 9 summarises the total remuneration for the chief executive officer over the last five years, and the outcomes of short- and long-term incentive plans as a percentage of maximum. Table 9: Remuneration for the chief executive officer over the last five years Financial year 2009/ / / / /13 /14 Chief executive officer Keith Clarke Keith Clarke Keith Clarke 1 Uwe Krueger 1 Uwe Krueger Uwe Krueger Total remuneration (single figure) 000 1, , , Annual bonus (% of maximum) Long-term variable pay (% of maximum) LTIP Long-term variable pay (% of maximum) LGU n/a n/a n/a 1. Keith Clarke retired as a director on 31 July 2011 and Uwe Krueger was appointed as a director on 14 June Total remuneration (single figure) includes 732.8k in respect of the 2011 LTIP award. Strategic Report Single total figures of remuneration for /14 executive directors (audited) Table 10 sets out in the required form the total remuneration paid to each of our executive directors for the financial year ended 31 March. Table 10: Total /14 remuneration executive directors / Salary Fixed elements of reward Variable elements of reward Taxable Other benefits 1 Pension 2 Sub-total Annual bonus 3 Vested LTIP 4 payments Sub-total Total 2012/13 / /13 / / / / / Heath Drewett , Alun Griffiths Uwe Krueger , , ,387.8 Total 1, , , , , , , , , , , Taxable benefits principally comprise medical insurance/healthcare allowance, company car or car allowance and, in respect of Uwe Krueger, an expense allowance of 15,000 per year. 2. Cash value of defined contribution or cash equivalent. 3. Value of total bonus (two thirds cash and one third shares). Further detail on bonus payments is provided in table LTIP awards are in the form of nil-cost options. The figures above relate to awards made in The TSR performance condition attached to these awards has been met in full. The EPS condition has been met in part. The awards vest and are capable of being exercised from 20 June. The disclosed value is based on the average mid-market quotation of the Company s shares for the three months ended 31 March and includes the value of dividend equivalents which will be payable following exercise. The final value of the LTIP will be on the basis of the Company s share price on vesting. 5. Dividend equivalent payment made following the exercise during the year of an award made in connection with an EBS deferral under the terms of the Atkins Deferred Share Plan. 6. Uwe Krueger receives an aggregate allowance for travel expenses incurred between his home and the UK during the first five years following his appointment of 39,000 (a direct replacement for the rental allowance disclosed in 2011). 2012/ / / / / / / / / Financial Statements Corporate Information

98 96 Remuneration Report continued Annual Remuneration Report Single total figures of remuneration for /14 chairman and non-executive directors (audited) Table 11 sets out in the required form the total remuneration earned by our chairman and non-executive directors for the financial year ended 31 March. Table 11: Total /14 remuneration chairman and non-executive directors Fees Taxable benefits 3 Total / / / / / / Chairman Allan Cook Non-executive directors Fiona Clutterbuck Allister Langlands Raj Rajagopal Rodney Slater Thomas Leppert Former non-executive directors Admiral the Lord Boyce Joanne Curin Total Lord Boyce retired from the Board on 31 July. This remuneration relates to the proportion of the year for which he held office. 2. Joanne Curin retired from the Board on 31 January. This remuneration relates to the proportion of the year for which she held office. 3. Includes business expenses chargeable to income tax. The total amount of fees paid to the chairman and non-executive directors was 457.3k (: 436.0k) which is within the limit set in the Company s articles of association, which have been previously approved by shareholders. Implementation of remuneration policy: executive directors Salary The salary of each of the executive directors increased with effect from 1 April as set out in table 12 (below) in accordance with the disclosed policy (page 85). Uwe Krueger s and Alun Griffiths salaries increased by 3% and 3.5% respectively, in line with the average salary increase across the Group of just above 3%. As disclosed in the remuneration report, Heath Drewett received a salary increase of 7.4%. This increase, which was above the average salary increase across the Group, reflected the expanded remit of his role, which encompassed several areas traditionally carried out by a chief operating officer, delivery of operational improvement programmes and increased involvement in the development of strategy. The Committee has increased the salaries of the executive directors with effect from 1 April as set out in table 12 in accordance with the disclosed policy (page 85). The average salary increase for Group employees was 3.96%. Table 12: Executive director salaries Increase in salary from prior year Increase in salary from 2012 Name Salary from 1 April Salary from 1 April Heath Drewett 347, % 335, % Alun Griffiths 243, % 235, % Uwe Krueger 586, % 566, %

99 97 Remuneration Report continued Annual Remuneration Report Pension (audited) Defined contribution pension contributions or a cash allowance in lieu of pension contribution for the executive directors are shown in table 13. Table 13: Defined contribution pension contribution or cash allowance Name Pension contribution as a % of salary Heath Drewett 25 Alun Griffiths 12 Uwe Krueger 25 The maximum Company contribution to the defined contribution pension of other UK-based staff is 10% of salary, except for those affected by the removal of the link to final salary, as discussed further below. Heath Drewett and Uwe Krueger receive higher contributions reflecting their roles as executive directors. Alun Griffiths retains an entitlement to a defined benefit pension on the same basis as other long-serving UK employees. During 2011 a consultation was held with staff with a defined benefit pension entitlement to remove the link to final salary via an amendment to their contracts of employment. From 1 February 2012 this final salary link was removed and transitional relief is being paid to all employees (including Alun Griffiths) affected by the contractual change. The transitional relief is 2% of salary until 2015 and a further 3% from 2015 to This is in addition to the maximum Company contribution of 10% of salary. Table 14 gives details of pensions or, where applicable, taxable allowance in lieu of pension provided to executive directors for the year ended 31 March. Table 14: Pension payments Employer contribution /14 Cash in lieu of pension /14 Accrued defined benefit pension as at 31 March Employer contributions 2012/13 Cash in lieu of pension 2012/13 Normal retirement age 1 Name Heath Drewett 37,487 46,264 49,920 28,080 n/a Alun Griffiths 28,200 82,394 27, Uwe Krueger 141, ,500 n/a 1. Normal retirement age is the earliest age at which a director can elect to draw their pension under the rules of the scheme. Strategic Report Financial Statements Corporate Information

100 98 Remuneration Report continued Annual Remuneration Report Annual bonus: /14 performance against targets (audited) The Committee s assessment of performance in the financial year ended 31 March is shown in table 15. Table 15: Assessment of performance and bonus payout Component Overview of performance Group profit after tax (50%) Cash conversion (25%) Personal objectives (25%) The Group has delivered another set of good results in an international market that continues to experience a range of operating challenges. The reported profit after tax was 96.3m ( restated: 84.3m). The Committee adjusted actual performance downwards to remove the impact of significant one-off items to ensure that payment reflected underlying performance. The adjusted profit after tax result was 86.2m ( restated: 81.0m), exceeding the stretch target of 83.4m for the year ( restated: 80.9m). This resulted in full payment of this component of bonus. The Committee considered quality, safety and environmental performance when making the bonus awards and determined that no adjustment was necessary. The cash conversion target measured operating cash flow as a percentage of budgeted profit. The Group s cash performance was good, with operating cash flow increasing to 95.5m (: 82.9m). The half year and full year stretch cash conversion targets were 40% and 85% respectively. The half year cash conversion result was 43% and the full year result was 85% leading to full payment for this component of the bonus. Heath Drewett Payment of 95% achieved for: the successful conclusion of repayment plan negotiations with the trustee of the Atkins Pension Plan following the conclusion of the triennial valuation successfully driving improvements to operational and financial performance with specific reference to project performance implementing changes to improve the budget structure and associated processes. Alun Griffiths Payment of 100% achieved for: successfully strengthening regional management teams and developing a more robust talent pipeline progress in embedding the Group s leadership capability model in development, assessment, promotion and succession processes internationalisation of the Group s recruitment process to provide access to a broader talent pool. Uwe Krueger Payment of 86.7% achieved for: successfully executing the Group s strategy and improving operational performance continuing focus and initiatives to increase the Company s influence and standing in its chosen markets successfully implementing robust internal succession initiatives. Annual bonuses payable to the executive directors for the financial year ended 31 March are shown in table 16. Two thirds will be payable in cash and one third will be deferred into shares for three years subject to continued employment. Table 16: Annual bonuses /14 bonus 2012/13 bonus Name Cash Deferred Total % of salary Increase/ (decrease) in annualised bonus from prior year Cash Deferred Total % of salary Increase/ (decrease) in annualised bonus from prior year Heath Drewett 220, , , % 205, , , % Alun Griffiths 1 235, , % 149,442 74, , % Uwe Krueger 456, , , % 426, , , % 1. Alun Griffiths retires from the Company on 30 July.

101 99 Remuneration Report continued Annual Remuneration Report Annual bonus: /15 performance targets The Committee has determined that the bonus for the year ending 31 March 2015 will be operated on similar terms to /14. 50% of the bonus will be based on Group profit after tax performance. 50% of the maximum will be paid for meeting the budgeted profit after tax target and 100% for meeting a stretch target. 25% of the bonus will be based on a cash conversion measure. The profit after tax and cash conversion targets are considered commercially sensitive so will not be disclosed, although the Committee s assessment of performance against these targets will be confirmed in next year s report. The remaining 25% will be based on individual objectives aligned to key strategic areas for each executive director. Table 17 provides the headline strategic areas under which performance targets have been set. The performance targets which apply to these areas are measurable, challenging and subject to rigorous review by the Committee, both at the time they are set, during the year and at the year end when performance is assessed. Subject to commercial sensitivity, we intend to provide an overview of the Committee s assessment of performance against the underlying targets in next year s report. Table 17: Strategic areas included in /15 annual bonus Name 1 Strategic area Heath Drewett Pension deficit Financial and major project reporting Opportunities to accelerate EPS growth Alun Griffiths Transition to new HR leadership Senior management development Succession planning Uwe Krueger Leadership development Succession planning Opportunities to accelerate EPS growth Strategic Report 1. Strategic areas for James Cullens, who has been appointed with effect from 1 July, will be determined once he joins the Company. LTIP outcomes in /14 (audited) The long-term incentive values shown in the single total remuneration figure table (table 10) relate to LTIP awards granted in 2011 and for which the performance period ended on 31 March. The performance targets and vesting levels are set out in table % of the award was subject to a TSR condition. This performance measure has been met in full. The remaining 50% was subject to an EPS condition. In order to ensure that the performance of this element was determined on a consistent basis with the calculation of EPS at award, the Committee adjusted for the impact of the material IAS 19 accounting change introduced during the final year of the performance period. This adjustment resulted in an increase from the reported EPS of 88.1p to an adjusted EPS of 95.3p. Accordingly, 37.4% of the shares subject to this element of the award will vest. Table 18: 2011 LTIP awards TSR condition Target for vesting Actual vesting Threshold Maximum FTSE 250 (excluding investment trusts) Upper quartile Upper (ranked 45 Median quartile out of 194) Vesting level 30% 100% 100% EPS condition Target for vesting Actual vesting Threshold Maximum EPS growth above RPI 1 4% 10% EPS growth over the performance period 12.48% 33.10% 14.7% Vesting level 30% 100% 37.4% 1. EPS adjusted to remove the impact of changes to IAS 19 to enable a like-for-like comparison with 2011 EPS. Financial Statements Corporate Information

102 100 Remuneration Report continued Annual Remuneration Report LTIP and LGU awards in /14 The long-term incentive framework is built around two performance measures, both of which are simple in design and fundamentally aligned to the creation of shareholder value, as illustrated in figure 4: Growth in EPS. The primary metric for measuring the delivery of our growth objective over the medium to long-term. It is incorporated into the long-term incentive framework via the LTIP, which is our primary long-term incentive vehicle, reflecting the importance of EPS growth to our strategy Sustained growth in the share price. This ensures alignment between executive reward and sustained share price growth over the long-term, representing the ultimate measure of performance for our shareholders, and is incorporated into the long-term incentive framework via the LGU. Figure 4: Long-term incentive framework Performance measure EPS Share price growth Delivery mechanism LTIP LGU Vesting period 3 years 4, 5 and 6 years Executive directors received a LTIP award of 75% of salary. The vesting of these awards is subject to the EPS targets described in table 19. Table 19: LTIP performance measure for awards made in Atkins EPS growth % of award that vests 12% or greater per annum 100 Between 5% and 12% per annum Pro rata between 25 and 100 on a straight-line basis 5% per annum 25 Below 5% per annum 0 The Committee believes that these EPS targets are appropriate and stretching in the current environment. Performance against these targets will be measured from 1 April to 31 March Executive directors also received a LGU award of 50% of salary. The vesting of each tranche of this award is subject to the Committee s assessment of the Group s progress against its strategy. This will include: driving margins over the longer term above 8% reducing dependence on the UK (with our long-term aspiration being to have more than 75% of our business outside the UK) growing organically and through acquisition. LTIP and LGU awards made during the year are set out in table 20. Table 20: LTIP and LGU awards made during the year (audited) Plan Date of award Face value (% of basic salary) Face value 1 ( ) Target performance (% of face value) Stretch performance (% of face value) End of performance period Heath Drewett LTIP 24/06/13 75% 251,112 25% 100% 31/03/16 LGU 24/06/13 50% 167, % 16.7% 31/03/17 31/03/18 31/03/19 Alun Griffiths LTIP 24/06/13 75% 176,152 25% 100% 31/03/16 LGU 24/06/13 50% 117, % 16.7% 31/03/17 31/03/18 31/03/19 Uwe Krueger LTIP 24/06/13 75% 424,656 25% 100% 31/03/16 LGU 24/06/13 50% 283, % 16.7% 31/03/17 31/03/18 31/03/19 1. Face value for the LTIP awards has been calculated using the middle market quotation for an Atkins ordinary share on the date of grant, which was Face value for the LGU awards has been calculated using the middle market quotation for an Atkins ordinary share during the six months immediately preceding the date of grant, which was The stated values exclude any amount attributable to dividend equivalents over the relevant performance periods.

103 101 Remuneration Report continued Annual Remuneration Report LTIP and LGU awards to be made in /15 The Committee intends to make LTIP and LGU awards to Uwe Krueger and Heath Drewett on the same basis as the awards made in the financial year ended 31 March. All-employee share plans Uwe Krueger, Heath Drewett and Alun Griffiths participate in the SIP. Executive director changes in /15 James Cullens was appointed to succeed Alun Griffiths as Group HR director. As previously announced, James will join the Board as an executive director on 1 July and Alun will retire at the AGM on 30 July. James has been appointed with a salary of 270,000 per annum, a pension allowance of 25% of salary and a maximum bonus opportunity of 100% of salary, of which one-third will be deferred into shares for a period of three years. He will also be eligible to receive LTIP and LGU awards and other benefits at the levels contained within the future policy table (table 1). James s appointment followed an extensive search process and his salary and package is within the competitive market range. The following arrangement will apply to Alun as a consequence of his retirement following 28 years of service to the Group: his bonus for the financial year ended 31 March, due in July as detailed in table 16, will be paid entirely in cash any bonus due for the financial year ending 31 March 2015 will be paid in July 2015 in cash to the extent to which the relevant performance conditions have been met deferred share awards made under the terms of the DSP will vest on 30 July and be exercisable within six months of his retirement outstanding awards made under the Company s LTIP and LGU plans (contained in tables 23 and 24) vest in accordance with the rules of the relevant plans subject to meeting the requirements of the applicable performance conditions; awards will be time pro-rated as specified in the relevant plan rules. Strategic Report Alun will continue to work with the Group on a consultancy basis for the next 12 months. This will cover a number of areas including advice and support in relation to management development and client relationships. It is anticipated that he will be engaged for around 30 days during this period. Implementation of remuneration policy: non-executive directors Fees The Board, on the recommendation of the executive directors, approved changes to the fees paid to non-executive directors as set out in table 21. Table 21: Chairman and non-executive directors fees Increase in fee from prior year Increase in fee from 2012 Fee description Fee as at 1 April Fee as at 1 April Chairman fee 1 202, % 195, % Non-executive director fee Basic annual fee 44, % 42, % Committee chair annual fee 1 7,500 7,500 Committee annual fee 1 4,000 4,000 Senior independent director fee 5,000 5, No fee is paid in respect of chairmanship or membership of the Nomination Committee. The increase to the fees of both the chairman and the non-executive directors were in line with the average increase across the Group of 3.96% with effect from 1 April (: just above 3%). Payments to past directors (not subject to audit) Lord Boyce retired from the Board on 31 July. He has continued to provide consultancy services to the Group, chairing the Group s international advisory Board. Financial Statements Corporate Information Keith Clarke, who retired from the Board on 31 July 2011, retained a pro-rated entitlement to 16,309 shares granted under the terms of the Atkins Long-Term Incentive Plan. In accordance with the rules of this plan, 68.7% of his retained award will vest on 20 June and be exercisable within six months.

104 102 Remuneration Report continued Annual Remuneration Report Payments for loss of office (audited) There were no payments for loss of office made during the year. Statement of directors shareholdings and share interests (audited) Share ownership guidelines Executive directors are ordinarily expected to build up an interest in the Company s shares equivalent to one times their salary, based on the value of such shares at the time of the acquisition or their current market value, whichever is the higher. The interests of the directors and their families in the ordinary shares of 0.5p each in the Company as at 31 March are shown in tables 22 and 23 (below). As the shareholding guideline only came into effect on 1 April 2012 and allows five years to build up an interest, it is not yet possible to determine whether or not it has been met, although it can be seen that all executive directors have increased their shareholdings during the year. There are no shareholding requirements for the chairman or the non-executive directors. Directors interests in shares of the Company Table 22: Executive directors interests in shares of the Company As a As a As a At 11 June percentage of salary 3 At 31 March percentage of salary 3 At 31 March percentage of salary 3 Heath Drewett 1 10, % 10, % % Alun Griffiths 2 37, % 37, % 36, % Uwe Krueger 1 21, % 21, % 20, % 1. Changes in interests of Heath Drewett and Uwe Krueger between 31 March and 11 June relate to shares acquired via the SIP. 2. Changes in interests of Alun Griffiths between 31 March and 11 June relate to shares acquired via the SIP and automatic dividend reinvestment within an ISA. 3. Based on the value of such shares at the time of their acquisition or market value at the stated date, whichever is the higher. 4. The Company was notified on 2 July of the reinvestment of dividends to purchase a further 309 shares on 7 September 2012, hence the number stated in the prior year s report as at 12 June and 31 March was 309 shares lower. Table 23: Chairman and non-executive directors interests in shares of the Company At 11 June At 31 March At 31 March Lord Boyce 1 n/a n/a 3,500 Fiona Clutterbuck 4,146 4,146 4,146 Allan Cook 17,142 17,142 17,142 Joanne Curin 2 n/a n/a 1,000 Allister Langlands 3 5,000 5,000 n/a Thomas Leppert 4 n/a Raj Rajagopal 5,000 5,000 15,000 Rodney Slater Total 31,288 31,288 40, Resigned on 31 July. Lord Boyce held 3,500 shares as at the date of his resignation. 2. Resigned on 31 January. Joanne Curin held 1,000 shares as at the date of her resignation. 3. Appointed on 4 September. 4. Appointed on 1 October.

105 103 Remuneration Report continued Annual Remuneration Report Share awards (audited) Tables 24 and 25 set out details of the executive directors interests in relation to share awards made under each of the Company s share plans. Table 24: Directors share options and long-term incentives DSP and LTIP (nil-cost options) Plan name 1 Award date Number of shares under option at 1 April Granted Exercised Lapsed Number of shares under option at 31 March 2 Market price on exercise (pence) Midmarket price at date of grant (pence) Gain on exercise ( ) First date of exercise/ end of performance condition Date of lapse/ expiry of option Heath Drewett LTIP A 3 21/06/10 46, , /06/13 21/06/20 20/06/11 40,000 40, /06/14 20/06/21 LTIP B 4 13/08/12 35,082 35, /08/15 13/08/22 24/06/13 25,808 25, /06/16 24/06/23 DSP 21/06/10 9,364 9, ,951 21/06/13 21/06/20 20/06/11 11,154 11, /06/14 20/06/21 02/07/12 11,002 11, /07/15 02/07/22 24/06/13 10,549 10, /06/16 24/06/23 Total 152,602 36,357 9,364 46, ,595 94,951 Alun Griffiths LTIP A 3 21/06/10 33, , /06/13 21/06/20 20/06/11 29,500 29, /06/14 20/06/21 LTIP B 4 13/08/12 25,524 25, /08/15 13/08/22 24/06/13 18,104 18, /06/16 24/06/23 DSP 21/06/10 8,571 8, ,082 21/06/13 21/06/20 20/06/11 8,310 8, /06/14 20/06/21 02/07/12 7,895 7, /07/15 02/07/22 24/06/13 7,675 7, /06/16 24/06/23 Total 113,200 25,779 8,571 33,400 97,008 86,082 Uwe Krueger LTIP A 3 20/06/11 70,648 70, /06/14 20/06/21 LTIP B 4 13/08/12 61,844 61, /08/15 13/08/22 24/06/13 43,644 43, /06/16 24/06/23 DSP 02/07/12 19,078 19, /07/15 02/07/22 24/06/13 21,892 21, /06/16 24/06/23 Total 151,570 65, ,106 Aggregate gains on share options 181,033 Aggregate gains on share options 111,810 1 Plan names: LTIP A Atkins Long-Term Incentive Plan LTIP B WS Atkins plc Long-Term Incentive Plan DSP Atkins Deferred Share Plan 2. The awards granted under the terms of the LTIP and the DSP are structured as options, for which the exercise price is nil. 3. Subject to performance criteria described in note 35 to the Financial Statements. 4. Subject to performance criteria described in note 35 to the Financial Statements. 5. In 2010 the Remuneration Committee considered the impact of the expiry of a letter of credit in respect of the Metronet enterprise and the related provision giving rise to a one-off, non-cash pre-tax credit of 25m in the Group s income statement for the year. It concluded that the non-trading nature of this benefit was not a fair reflection of underlying earnings. It was therefore excluded and the lower normalised basic EPS for the year ended 31 March 2010 of 79.4p was used to calculate the vesting of LTIP awards made in 2007 and was also used as the EPS for the financial year immediately before the commencement of the performance period for the 2010 awards. Strategic Report Financial Statements Corporate Information

106 104 Remuneration Report continued Annual Remuneration Report Table 25: Directors long-term incentives LGU Plan (units) Plan name 1 Award date Number of units under option at 1 April Granted Exercised Lapsed Number of units under option at 31 March 3 Market price on exercise (pence) Midmarket price at date of grant (pence) Gain on exercise ( ) First date of exercise/ end of performance condition Date of lapse/ expiry of option Heath Drewett LGU 2 13/08/12 21,705 21, /08/16 13/08/22 24/06/13 18,980 18, /06/17 24/06/23 Total 21,705 18,980 40,685 Alun Griffiths LGU 2 13/08/12 15,792 15, /08/16 13/08/22 24/06/13 13,314 13, /06/17 24/06/23 Total 15,792 13,314 29,106 Uwe Krueger LGU 2 13/08/12 38,263 38, /08/16 13/08/22 24/06/13 32,096 32, /06/17 24/06/23 Total 38,263 32,096 70,359 Aggregate gains on units Aggregate gains on units 1. Plan names: LGU WS Atkins plc Long-term Growth Unit Plan. 2. The awards granted under the terms of the LGU are structured as units. 3. Subject to a strategic underpin as described in note 35 to the Financial Statements. Other Information The Remuneration Committee The Remuneration Committee is a committee of the Board. Its terms of reference are available on the Company s website or on request from the company secretary. The Committee has responsibility for setting remuneration policy and structure for the Company s chairman and executive directors. The Committee also has oversight of remuneration practices across the Group. A summary of the Committee s activities during the year is shown in figure 1 (page 82). Committee membership The independent non-executive directors who served on the Committee during the year are shown in table 26. Table 26: Members of the Committee during the year Member From To Admiral the Lord Boyce 5 May July Fiona Clutterbuck 15 June 2009 To date Raj Rajagopal 1 March 2009 To date Rodney Slater 9 September 2011 To date The Committee met eight times during the year (: six). Details of the attendance of members at meetings can be found in the Corporate Report (page 69). Committee meetings are attended by the Group HR director, Alun Griffiths. The chairman of the Board and the chief executive officer also attend meetings at the discretion of the Committee chairman. The company secretary acts as secretary to the Committee. No director or other attendee, including the company secretary, participates in discussions regarding their own remuneration. Advisors to the Committee During the year the Committee undertook a comprehensive tender process for the provision of advisory services. As a result of this process, the Committee appointed Towers Watson Limited (Towers) as the provider of advice on remuneration policy and structure, replacing Deloitte LLP (Deloitte). Towers is a member of the Remuneration Consultants Group (RCG) and adheres to its code of conduct. Table 26 provides a summary of advice received from each advisor to the Committee, fees paid and any other services provided by the advisor to the Group. The Committee is satisfied that the advice it has received has been objective and independent. The Committee also consulted the chairman of the Board, the chief executive officer, the Group HR director and the company secretary regarding remuneration policy.

107 105 Remuneration Report continued Annual Remuneration Report Table 27: Advisors to the Committee Advisor Services provided Fees Other services provided to the Group Towers Advises the Committee on remuneration policy and structure 10,000 Supporting management, with the approval of the Committee, on matters relating to senior management remuneration. Accounting disclosures for pension costs and risk broking. Deloitte Ashurst Tapestry Advised the Committee on remuneration policy and structure, advised on TSR outcomes Legal services, principally the drafting of share plan rules in accordance with policy determined by the Committee Legal services, principally interpretation of share plan rules 7,500 Supporting management, with the approval of the Committee, on matters relating to senior management remuneration. 6,600 Ashurst is one of a number of legal firms that provide legal advice and services to the Company on a range of matters. 832 Supporting management with international share plan compliance. Dilution DSP share awards can only be satisfied using market purchase shares held in the employee benefit trust (EBT). LTIP and LGU share awards can be satisfied using new issue shares, shares held in treasury or market purchase shares held in the EBT. The Committee reviews the hedging and dilution position of the Company at least bi-annually prior to making grants of share awards. Both the LTIP and LGU operate 5% in 10 years (executive schemes) and 10% in 10 years aggregate dilution limits, in line with best practice. At 31 March the EBT held 2,524,663 shares to hedge outstanding awards over 3,925,406 shares and 361,169 units. Using an approximation of one unit to one share, at this date the EBT held shares to satisfy 64% of all outstanding awards. No new issue shares have been used to satisfy share awards since 2005 and, to date, no treasury shares have been used. Strategic Report Outside appointments for executive directors Uwe Krueger and Alun Griffiths are currently non-executive directors of the companies listed in table 28 and retain the fees payable, as outlined in respect of these appointments. Table 28: Non-executive remuneration for executive directors Executive director Organisation name Remuneration basis Uwe Krueger ONTEX S.A. (Zele, Belgium) 60,000 per annum STR Holdings, Inc. (Connecticut, USA) to 14 May Annual grant of ordinary shares in STR Holdings, Inc. to the value of US$52,500 Fee of US$2,000 for each scheduled quarterly board and committee meeting attended Annual grant of restricted stock to the value of US$45,000, which will vest on the day immediately preceding the day of the next annual meeting of stockholders SUSI Partners AG (Zurich, Switzerland) 1% of the company s value relating to three years service on the board Alun Griffiths The McLean Partnership Ltd 10,000 per annum Severfield plc from 1 May 40,000 per annum basic fee 5,000 per annum for serving as chairman of the Remuneration Committee Shareholder voting and engagement The voting results for last year s Remuneration Report are set out in table 29. Table 29: Remuneration Report shareholder voting results Votes for Votes against Total votes Votes Resolution (m) % For (m) % Against cast (m) withheld (m) Approval of the Remuneration Report Financial Statements Corporate Information Refer to the letter from the Remuneration Committee chairman for a detailed commentary on the voting results (page 81). Approved by the Board and signed on its behalf by Dr Raj Rajagopal Chairman of the Remuneration Committee 11 June

108 106 Independent Auditor s Report to the members of WS Atkins plc Report on the financial statements Our opinion In our opinion: the financial statements, defined below, give a true and fair view of the state of the Group s and of the Company s affairs as at 31 March and of the Group s profit and of the Group s and Company s cash flows for the year then ended the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006 (the Act) the financial statements have been prepared in accordance with the requirements of the Act and, as regards the Group financial statements, Article 4 of the IAS Regulation. This opinion is to be read in the context of what we say in the remainder of this report. What we have audited The Group financial statements and Company financial statements (the Financial Statements), which are prepared by WS Atkins plc, comprise: the consolidated income statement and statement of comprehensive income for the year then ended the consolidated and Parent Company balance sheets as at 31 March the consolidated and Parent Company statements of changes in equity and statements of cash flows for the year then ended the notes to the Financial Statements, which include a summary of significant accounting policies and other explanatory information. The financial reporting framework that has been applied in their preparation comprises applicable law and IFRSs as adopted by the European Union and, as regards the Company, as applied in accordance with the provisions of the Act. Certain disclosures required by the financial reporting framework have been presented elsewhere in the Annual Report, rather than in the notes to the Financial Statements. These are cross-referenced from the Financial Statements and are identified as audited. What an audit of financial statements involves We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (ISAs (UK & Ireland)). 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 and Company s circumstances and have been consistently applied and adequately disclosed the reasonableness of significant accounting estimates made by the directors the overall presentation of the Financial Statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Overview of our audit approach Materiality We set certain thresholds for materiality. These helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the Financial Statements as a whole. Based on our professional judgement, we determined materiality for the Group Financial Statements as a whole to be 5.3m, which is approximately 5% of profit before tax, adjusted for exceptional items because in our view this represents the Group s underlying performance. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above 0.5m as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

109 107 Independent Auditor s Report to the members of WS Atkins plc continued Overview of the scope of our audit The Group reports its operating results and financial position in five segments, being United Kingdom and Europe, North America, Middle East, Asia Pacific and Energy. The Group Financial Statements are a consolidation of the Group s operating businesses and centralised functions. In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed by us, as the Group engagement team, or component auditors from other PwC network firms operating under our instruction. Where the work was performed by component auditors, we determined the level of involvement we needed to have in their audit work to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Group Financial Statements as a whole. Accordingly, the Group s operating businesses subject to an audit of their complete financial information contributed 90% of the Group s profit before tax adjusted for exceptional items. Strategic Report This, together with additional procedures performed at the Group level (e.g. goodwill impairment testing), gave us the evidence we needed for our opinion on the Group Financial Statements as a whole. Areas of particular audit focus In preparing the Financial Statements, the directors made a number of subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We primarily focused our work in these areas by assessing the directors judgements against available evidence, forming our own judgements and evaluating the disclosures in the Financial Statements. In our audit, we tested and examined information, using sampling and other auditing techniques, to the extent we considered necessary to provide a reasonable basis for us to draw conclusions. We obtained audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. We considered the following areas to be those that required particular focus in the current year. This is not a complete list of all risks or areas of focus identified by our audit. We discussed these areas of focus with the Audit Committee. Its report on those matters that it considered to be significant issues in relation to the Financial Statements is set out in the Audit Committee Report (page 78). Area of focus Timing and fraud in contract revenue recognition We focused on this area because the Group has entered into a number of large and complex long-term fixed price contracts. Revenue and profit recognition is determined based on the directors estimate of how complete the contracts are and the costs that will need to be incurred by the Group to complete them. Further, ISAs (UK & Ireland) presume that there is a risk of fraud in revenue recognition because of the pressure management may feel to achieve the planned results. How the scope of our audit addressed the area of focus We evaluated the relevant IT systems and tested the internal controls over the completeness, accuracy and timing of revenue recognised in the financial statements. We attended a number of contract review meetings with senior management to understand and challenge how it determined that forecasts were up to date and how poor performing contracts are identified and investigated. We tested, for a sample of contracts, management s monthly monitoring of the total forecast revenue for the contract, costs expected to be incurred in its completion, the profit recognised to date and the working capital position on the contract. We challenged senior management s judgements on the completeness of work for a sample of contracts by testing that contractual milestones had been reached and reading and considering the implications of correspondence with customers (both acceptance of work done and relating to disputes). We tested the forecast costs to complete the contracts by obtaining an understanding from senior management as to how they had estimated these costs, challenging the assumptions underpinning those estimates, evaluating the outturn of previous estimates and agreeing the actual costs incurred post-year end to the forecast costs for that period. Financial Statements Corporate Information

110 108 Independent Auditor s Report to the members of WS Atkins plc continued Area of focus Goodwill impairment assessment We focused on this area because the determination of whether or not an impairment charge for goodwill was necessary involved significant judgements about the future results of the North American business because this part of the business accounted for 166m of the total goodwill and has the closest headroom. The directors booked no impairment charge. (Refer also to note 16 to the Financial Statements (page 148)). Risk of management override of internal controls ISAs (UK & Ireland) require that we consider this. How the scope of our audit addressed the area of focus We evaluated the directors future cash flow forecasts and the process by which they were drawn up, including comparing them to the latest Board-approved budgets, and testing the underlying calculations. We challenged: the directors key assumptions for profit margins and long-term growth rates in the forecasts, by comparing them to historical results and economic and industry forecasts the discount rate, by assessing the cost of capital for the North America business and comparable organisations. We also performed sensitivity analysis around the key drivers of the cash flow forecasts, which were the discount rate and the profit margins. Having ascertained the extent of change in those assumptions that either individually or collectively would be required for the goodwill to be impaired, we considered the likelihood of such a movement in those key assumptions arising. We assessed the overall control environment of the Group, including the arrangements for staff to whistle-blow inappropriate actions, and interviewed senior management and the Group s internal audit function. We examined the significant accounting estimates and judgements relevant to the Financial Statements for evidence of bias by the directors that may represent a risk of material misstatement due to fraud (including, but not limited to, revenue recognition). We also tested journal entries to determine the rationale for manual adjustments. Going concern Under the Listing Rules we are required to review the directors statement (page 65) in relation to going concern. We have nothing to report having performed our review. As noted in the directors statement, the directors have concluded that it is appropriate to prepare the Group s and Company s financial statements using the going concern basis of accounting. The going concern basis presumes that the Group and Company have adequate resources to remain in operation, and that the directors intend them to do so, for at least one year from the date the Financial Statements are signed. As part of our audit we have concluded that the directors use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group s and the Company s ability to continue as a going concern. Opinions on other matters prescribed by the Companies Act 2006 In our opinion: the information given in the Strategic Report (pages 2 to 59) and the Directors Report (pages 62 to 65) for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements the part of the Remuneration Report (pages 81 to 105) to be audited has been properly prepared in accordance with the Act the information given in the Corporate Report (pages 66 to 73) in the Annual Report with respect to internal control and risk management systems is consistent with the financial statements. Other matters on which we are required to report by exception Adequacy of accounting records and information and explanations received Under the Act we are required to report to you if, in our opinion: we have not received all the information and explanations we require for our audit adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us the Company Financial Statements and the part of the Remuneration Report to be audited are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility.

111 109 Independent Auditor s Report to the members of WS Atkins plc continued Directors remuneration Under the Act we are required to report to you if, in our opinion, certain disclosures of directors remuneration specified by law have not been made. We have no exceptions to report arising from this responsibility. Corporate governance statement Under the Act, we are required to report to you if, in our opinion, a corporate governance statement has not been prepared by the Company. We have no exceptions to report arising from this responsibility. Under the Listing Rules we are required to review the part of the Corporate Report (pages 66 to 73) relating to the Company s compliance with nine provisions of the UK Corporate Code (the Code). We have nothing to report having performed our review. As required by Provision C.1.1 of the Code, the directors state that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group s performance, business model and strategy (page 65). As required by Provision C.3.8 of the Code, the Audit Committee has set out the significant issues that it considered in relation to the Financial Statements and how they were addressed (page 78). Under ISAs (UK & Ireland) we are required to report to you if, in our opinion: the statement given by the directors is materially inconsistent with our knowledge of the Group acquired in the course of performing our audit the section of the Annual Report describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee. We have no exceptions to report arising from this responsibility. Strategic Report Other information in the Annual Report Under ISAs (UK & Ireland), we are required to report to you if, in our opinion, information in the Annual Report is: materially inconsistent with the information in the audited Financial Statements apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group and Company acquired in the course of performing our audit otherwise misleading. We have no exceptions to report arising from this responsibility. Responsibilities for the financial statements and the audit Our responsibilities and those of the directors As explained more fully in the Directors statement of responsibility (pages 64 and 65), the directors are responsible for the preparation of the Group and Company financial statements and for being satisfied that they give a true and fair view. Financial Statements Our responsibility is to audit and express an opinion on the Group and Company Financial Statements in accordance with applicable law and ISAs (UK & 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 Act 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. Martin Hodgson (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 11 June Corporate Information

112 110 Financial Statements

113 Financial Statements Financial Statements 111 Page no. Consolidated Income Statement 112 Consolidated Statement of Comprehensive Income 113 Consolidated and Parent Company Balance Sheets 114 Consolidated and Parent Company Statements of Cash Flows 116 Consolidated Statement of Changes in Equity 117 Parent Company Statement of Changes in Equity 118 Notes to the Financial Statements 1 Accounting policies Financial risk management Segmental information Joint ventures Operating profit analysis of costs by nature Employee benefit costs Net finance costs Income tax expense Net profit on disposal of businesses/ non-controlling interests Business combinations Assets held for sale Exceptional items Dividends Earnings per share (EPS) Parent Company Income Statement and Statement of Comprehensive Income Goodwill Other intangible assets Property, plant and equipment Investments in subsidiaries Deferred income tax Financial instruments Available-for-sale financial assets Derivative financial instruments Other receivables Inventories Trade and other receivables Financial assets at fair value through profit or loss Cash and cash equivalents Borrowings Trade and other payables Provisions for other liabilities and charges Post-employment benefit liabilities Other non-current liabilities Ordinary shares Share-based payments Cash generated from continuing operations Analysis of net funds Contingent liabilities Operating lease arrangements Capital and other financial commitments Related party transactions Subsidiary undertakings Joint ventures Prior period amounts 178 Five-year Summary 179 Corporate Information Financial Statements Strategic Report

114 112 Financial Statements Consolidated Income Statement For the year ended 31 March Group Group Restated Note Gross revenue (Group and share of joint ventures) 1, ,775.5 Revenue 3 1, ,705.2 Cost of sales (1,065.0) (1,088.6) Gross profit Administrative expenses (571.4) (512.6) Operating profit 3, Comprising Underlying operating profit Exceptional items Amortisation and impairment of acquired intangibles 17 (2.7) (10.0) Net profit on disposal of businesses/non-controlling interests Income from other investments 1.2 Share of post-tax profit from joint ventures 3, Profit before interest and tax Finance income Finance costs 7 (17.8) (17.7) Net finance costs 7 (13.6) (14.3) Profit before tax Comprising Underlying profit before tax Exceptional items Amortisation and impairment of acquired intangibles 17 (2.7) (10.0) Net profit on disposal of businesses/non-controlling interests Income tax expense 8 (17.9) (13.7) Profit for the year Profit/(loss) attributable to: Owners of the parent Non-controlling interests 0.3 (0.3) Earnings per share Basic earnings per share p 86.8p Diluted earnings per share p 84.7p The notes on pages 119 to 178 are an integral part of these Financial Statements.

115 Financial Statements 113 Consolidated Statement of Comprehensive Income For the year ended 31 March Group Group Restated Note Profit for the year Other comprehensive (expense)/income Items that will not be reclassified to profit or loss Remeasurements of net post-employment benefit liabilities 32 (63.5) (47.1) Income tax on items that will not be reclassified 8, (57.1) (38.4) Items that may be reclassified subsequently to profit or loss Change in value of available-for-sale financial assets 22 (1.6) Cash flow hedges (2.3) 1.0 Net differences on exchange (21.6) 9.4 Total items that may be reclassified subsequently to profit or loss (23.9) 8.8 Other comprehensive expense for the year, net of tax 8 (81.0) (29.6) Total comprehensive income for the year Attributable to: Owners of the parent Non-controlling interests 0.3 (0.3) Total comprehensive income for the year Strategic Report Items in the statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income is disclosed in note 8. The notes on pages 119 to 178 are an integral part of these Financial Statements. Corporate Information Financial Statements

116 114 Financial Statements Consolidated and Parent Company Balance Sheets As at 31 March Group Group Restated Company Company Note Assets Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in subsidiaries Investments in joint ventures Deferred income tax assets Derivative financial instruments Other receivables Current assets Inventories Trade and other receivables Financial assets at fair value through profit or loss Cash and cash equivalents Derivative financial instruments Assets of disposal group classified as held for sale Liabilities Current liabilities Borrowings 29 (55.3) (59.8) (57.6) (59.8) Trade and other payables 30 (453.1) (486.7) (77.2) (83.1) Derivative financial instruments 23 (2.7) (1.4) Current income tax liabilities (31.6) (40.5) Provisions for other liabilities and charges 31 (0.8) (1.5) (543.5) (589.9) (134.8) (142.9) Liabilities of disposal group classified as held for sale 11 (5.2) (543.5) (595.1) (134.8) (142.9) Net current assets

117 Consolidated and Parent Company Balance Sheets continued Financial Statements 115 Group Group Restated Company Company Note Non-current liabilities Borrowings 29 (45.5) (49.4) (45.5) (49.3) Provisions for other liabilities and charges 31 (3.3) (4.4) Post-employment benefit liabilities 32 (339.0) (295.6) Derivative financial instruments 23 (1.7) (1.3) Deferred income tax liabilities 20 (15.5) (20.1) Other non-current liabilities 33 (1.5) (1.5) (406.5) (372.3) (45.5) (49.3) Strategic Report Net assets Capital and reserves Ordinary shares Share premium account Merger reserve Retained earnings Equity attributable to owners of the parent Non-controlling interests 0.2 (0.2) Total equity The Financial Statements on pages 112 to 178 were approved by the Board on 11 June and signed on its behalf by: Prof Dr Uwe Krueger Director Heath Drewett Director The notes on pages 119 to 178 are an integral part of these Financial Statements. Corporate Information Financial Statements

118 116 Financial Statements Consolidated and Parent Company Statements of Cash Flows For the year ended 31 March Group Group Company Company Note Cash flows from operating activities Cash generated from operations Interest received Interest paid (5.6) (3.2) (6.0) (2.9) Income tax paid (10.9) (7.1) Net cash generated from/(used in) operating activities (0.6) 12.5 Cash flows from investing activities Investments in subsidiary companies (1.8) Acquisitions of subsidiaries consideration 10 (9.5) cash acquired Loans to joint ventures and other related parties (0.4) (1.8) Distributions received from joint ventures 5.6 Purchases of property, plant and equipment (13.5) (18.3) Proceeds from disposals of property, plant and equipment Proceeds from disposal of businesses/non-controlling interests Payments associated with disposal of businesses 9 (2.6) (2.1) Dividends received from other investments 1.2 Dividends received Purchases of financial assets (0.2) Proceeds from disposal of financial assets Purchases of intangible assets (4.3) (6.1) Net cash generated from/(used in) investing activities 0.4 (5.4) Cash flows from financing activities Proceeds of new debt Repayment of bank loans (47.5) (47.5) Redemption of loan notes receivable 0.5 Finance lease principal payments 37 (0.6) (1.8) Purchase of own shares by employee benefit trusts (8.4) (7.0) Equity dividends paid to shareholders 13 (31.7) (30.0) (31.7) (30.0) Loans granted to Group companies (10.5) (7.0) Repayment of loans to Group companies Repayment of loans from Group companies (5.3) Net cash used in financing activities (40.2) (38.8) (47.4) (31.1) Net increase/(decrease) in cash and cash equivalents (2.6) (10.3) Cash and cash equivalents at beginning of year Exchange movements (7.0) 3.5 (0.1) Cash and cash equivalents and bank overdraft at end of year 28, (2.4) 0.3 The notes on pages 119 to 178 are an integral part of these Financial Statements.

119 Consolidated Statement of Changes in Equity For the year ended 31 March Financial Statements 117 Ordinary shares Attributable to owners of the parent Share premium Merger Retained account reserve earnings Total Noncontrolling interests Total equity Note Group Balance at 1 April 2012 (as previously reported) Effect of change in accounting policy Balance at 1 April 2012 (restated) Profit/(loss) for the year (0.3) 84.3 Remeasurements of net post-employment benefit liabilities (47.1) (47.1) (47.1) Income tax on items that will not be reclassified Change in value of available-for-sale financial assets (1.6) (1.6) (1.6) Cash flow hedges Net differences on exchange Other comprehensive expense for the year (29.6) (29.6) (29.6) Total comprehensive income/(expense) for the year (0.3) 54.7 Dividends to owners of the parent 13 (30.0) (30.0) (30.0) Share-based payments Tax credit relating to share-based payments Employee benefit trusts (7.0) (7.0) (7.0) Total contributions by and distributions to owners (29.9) (29.9) (29.9) of the parent, recognised directly in equity Balance at 31 March (restated) (0.2) Profit for the year Remeasurements of net post-employment benefit liabilities (63.5) (63.5) (63.5) Income tax on items that will not be reclassified Cash flow hedges (2.3) (2.3) (2.3) Net differences on exchange (21.6) (21.6) (21.6) Other comprehensive expense for the year (81.0) (81.0) (81.0) Strategic Report Financial Statements Total comprehensive income for the year Dividends to owners of the parent 13 (31.7) (31.7) (31.7) Share-based payments Tax credit relating to share-based payments Employee benefit trusts (8.4) (8.4) (8.4) Total contributions by and distributions to owners (31.5) (31.5) (31.5) of the parent, recognised directly in equity Acquisition of non-controlling interest Balance at 31 March Restated for the impact of IAS 19 (revised), see note 1 and note 44. Corporate Information The merger reserve relates to the issue of shares in respect of previous acquisitions. The notes on pages 119 to 178 are an integral part of these Financial Statements.

120 118 Financial Statements Parent Company Statement of Changes in Equity For the year ended 31 March Note Ordinary shares Attributable to owners of the parent Share premium Merger Retained account reserve earnings Total Noncontrolling interests Total equity Company Balance at 1 April Profit for the year Total comprehensive income for the year Dividends to owners of the parent 13 (30.0) (30.0) (30.0) Share-based payments Total contributions by and distributions to owners (23.5) (23.5) (23.5) of the parent, recognised directly in equity Balance at 31 March Profit for the year Total comprehensive income for the year Dividends to owners of the parent 13 (31.7) (31.7) (31.7) Share-based payments Total contributions by and distributions to owners (25.0) (25.0) (25.0) of the parent, recognised directly in equity Balance at 31 March The merger reserve relates to the issue of shares in respect of previous acquisitions. The notes on pages 119 to 178 are an integral part of these Financial Statements.

121 Notes to the Financial Statements For the year ended 31 March Financial Statements Accounting policies WS Atkins plc (the Company) is a public limited company, which is listed on the London Stock Exchange and is incorporated and domiciled in England and Wales. The address of its registered office is Woodcote Grove, Ashley Road, Epsom, Surrey, KT18 5BW, England. The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied to all the years presented, including the application of new International Financial Reporting Standards (IFRSs) and interpretations, unless otherwise stated. Basis of preparation The Consolidated Financial Statements of WS Atkins plc have been prepared in accordance with IFRSs as adopted by the European Union (EU), the Companies Act 2006 that applies to companies reporting under IFRS, and IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The Consolidated Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. Strategic Report The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements, are disclosed under critical accounting policies and are incorporated by reference in the Business Review (page 43). Changes in accounting policy and disclosure New and amended standards adopted by the Group The following standards have been adopted by the Group for the first time for the financial year beginning on 1 April and have a material impact on the Group: IAS 19, Employee benefits, was revised in June The changes on the Group s accounting policies has been as follows: to replace the interest cost and expected return on plan assets with a net interest charge on the net defined benefit liability; to recognise immediately in the income statement unvested past service cost and administration costs; this also had a small impact on the Group s defined benefit liability. For the comparative year ended 31 March, the restated profit after tax is 4.1m lower and other comprehensive expense is 4.5m lower than previously reported. The effect of this resulted in the net defined benefit obligation at 1 April 2012 being restated as 262.5m (previously 265.3m); and 31 March as 295.6m (previously 298.8m), see note 32. Comparative information has been restated for the effect of the retrospective application of the amendment to IAS 19 as disclosed in note 44. The following standards have been adopted by the Group for the first time for the financial year beginning on 1 April and does not have a material impact on the Group: Amendment to IAS 1, Financial statement presentation regarding other comprehensive income. The main change resulting from this amendment 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). This amendment has been applied retrospectively and the presentation of items of comprehensive income have been reclassified. There has been no measurement impact on the consolidated accounts of applying the amendments to IAS 1. Amendment to IFRS 7, Financial instruments: Disclosures, on asset and liability offsetting. This amendment introduces new disclosures of information about the significance of financial instruments to an entity. IFRS 13, Fair value measurement. The objective of the standard is to define the term fair value and to establish guidance and disclosure requirements for fair value measurement that should be applied across standards. In the new standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent market participants at the measurement date. For non-financial assets, the fair value is determined based on the highest and best use of the asset as determined by a market participant. There has been no measurement impact on the consolidated accounts of applying IFRS 13. Annual Improvements These Annual Improvements address six areas, none of which materially impacted the Group s primary statements. In addition, following a change in its operational management, the Group has amended its operating segments for reporting purposes to reflect the United Kingdom and Europe as one segment; previously Europe had been managed and reported with Asia Pacific. The revised segments are: United Kingdom and Europe, North America, Middle East, Asia Pacific and Energy. The segmental results and assets and liabilities for the comparative year ended 31 March have been represented in line with these revised segments. Financial Statements Corporate Information

122 120 Financial Statements Notes to the Financial Statements continued New standards and interpretations not yet adopted by the Group The following accounting standards, interpretations and amendments have been issued by the IASB but had either not been adopted by the European Union or were not yet effective in the European Union for the financial year beginning 1 April : IFRS 9, Financial Instruments IFRS 10, Consolidated Financial Statements IFRS 11, Joint Arrangements IFRS 12, Disclosure of Interests in Other Entities IFRS 14, Regulatory deferral accounts IAS 27 (revised 2011), Separate financial statements IAS 28 (revised 2011), Associates and joint ventures IAS 36, Impairment of Assets on recoverable amount disclosures Amendments to the following standards: IFRS 10, IFRS 12 and IAS 27: Investment Entities IFRS 10, IFRS 11 and IFRS 12: Transition Guidance IAS 19, Employee Benefits: Defined Benefit Plans: Employee Contributions IAS 32, Financial Instruments: Presentation IAS 39, Financial Instruments: Recognition and Measurement The Group is currently assessing the impact of the new standards, amendments and interpretations that are not yet effective. The Group does not currently believe adoption of these would have a material impact on the consolidated results or financial position of the Group. Going concern The directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing the Financial Statements. Basis of consolidation The Consolidated Income Statement and Balance Sheet include the accounts of the Company, its subsidiary undertakings and its share of joint ventures. The results of the subsidiary undertakings acquired during the year are included in the Consolidated Income Statement from the date of acquisition. The results of subsidiary undertakings disposed of during the year are included in the Consolidated Income Statement up to the date of disposal. Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. Investments in subsidiaries are stated at cost less impairments. The cost of an acquisition is measured as the fair value of the assets, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date irrespective of any non-controlling interest. Acquisition-related costs are expensed as incurred. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income.

123 Financial Statements 121 Notes to the Financial Statements continued The excess of the consideration transferred over the fair value of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is lower than the fair value of net assets of the subsidiary acquired, the difference is recognised directly in the income statement. Goodwill is reviewed on finalisation of fair values and any adjustments required to the accounting are recorded within 12 months of the acquisition date. Intercompany transactions, balances, income and expenses on transactions between Group companies are eliminated. Where subsidiaries adopt accounting policies that are different from the Group s, their reported results are restated to comply with the Group s accounting policies. Where subsidiaries do not adopt accounting periods that are coterminous with the Group s, results and net assets are based upon unaudited accounts drawn up to the Group s accounting reference date. Joint ventures In accordance with IAS 31, Interests in joint ventures, the Group accounts for joint ventures under the equity method of accounting. The Group s share of a joint venture s profit after tax is included from the date on which the Group acquires joint control. Within the Consolidated Balance Sheet, the investment is recorded at cost (classified as a non-current asset) and subsequently adjusted to reflect the Group s share of the movements in the joint venture s net assets post acquisition. Strategic Report The results, assets and liabilities of joint ventures are stated in accordance with the Group s accounting policies. Where joint ventures adopt accounting policies that are different from the Group s, their reported results are restated to comply with the Group s accounting policies. Where joint ventures do not adopt accounting periods that are coterminous with the Group s, results and net assets are based upon unaudited accounts drawn up to the Group s accounting reference date. Employee benefit trusts The accounts of the employee benefit trusts (EBTs) are incorporated into the results of the Group as, although they are administered by independent trustees and their assets are held separately from those of the Group, in practice, the Group s recommendations on how the assets are used for the benefit of employees are normally followed. The Group bears the major risks and rewards of the assets held by the EBTs until the shares vest unconditionally with the employees. Shares in WS Atkins plc held by the EBTs are shown as a reduction in retained earnings. Other assets and liabilities held by the EBTs are consolidated with the assets of the Group. Foreign currency transactions and translation Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Consolidated Financial Statements are presented in pounds sterling ( ), which is the Company s and Group s presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Income Statement, except when deferred in other comprehensive income, for example, as qualifying cash flow hedges. Group companies The results and financial position of all Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the Group s presentation currency are translated into the Group s presentation currency as follows: assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet income and expenses for each income statement are translated at average exchange rates all resulting exchange differences are recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income. Financial Statements Corporate Information

124 122 Financial Statements Notes to the Financial Statements continued Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the chief executive officer and the Group finance director. The Group s operating segments for management purposes reflect predominantly its key geographical markets. As noted above, the segments are: United Kingdom and Europe, North America, Middle East, Asia Pacific and Energy. These segments form the basis for reporting the Group s segment information as they are the main determinants of the Group s risks and returns. The Group considers the UK to be its country of domicile. Intersegment transfers and transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties. Revenue Revenue from long term contracts comprises the value of work performed during the period calculated in accordance with the Group s policy for contract accounting set out below. Revenue from other contract activities represents fee income receivable in respect of services provided during the period. Under certain services contracts, the Group manages customer expenditure and is obliged to purchase goods and services from third party contractors and recharge them to the customer at cost. The amounts charged by contractors and recharged to customers are excluded from revenue and cost of sales where the Group is acting solely as an agent. Receivables, payables and cash relating to these transactions are included in the Consolidated Balance Sheet. Underlying profit Underlying operating profit is profit before exceptional items, amortisation and impairment of intangible assets recognised on acquisition and material transaction costs associated with acquisitions, and relates to continuing operations. Revenue recognition and contract accounting The value of contract work in progress comprises the costs incurred on contracts plus an appropriate proportion of overheads and attributable profit. Fees invoiced on account are deducted from the value of work in progress and the balance is separately disclosed in trade and other receivables as amounts recoverable on contracts, unless such fees exceed the value of the work in progress on any contract in which case the excess is separately disclosed in trade and other payables as fees invoiced in advance. Revenue is recognised on the majority of the Group s contracts on a percentage completion basis when the outcome of a contract or project can be reasonably foreseen. Under the percentage completion method, the percentage of the total forecast revenue reported at any point in time is calculated based upon the proportion of total costs incurred to date as a percentage of total forecast costs or, in some cases, based upon the estimated physical per cent complete of the total work to be performed under the contract. In some cases, a margin provision is then made, depending on how far progressed each project is and the risk profile of the project. Where contracts span two or more accounting periods, profit is not generally recognised until the contract is 50% complete. In addition, provision is made in full for estimated losses and, where the outcome of a contract cannot be reasonably foreseen, profit is taken on completion. Revenue recognition on outsourcing contracts is determined by reference to the proportion of the annual service delivered to date. Where the costs of obligations in relation to the non-renewal or termination of a contract are higher in the final period of the contract, a proportion of revenue is deferred each period to meet these anticipated costs. Full provision is made for losses on outsourcing contracts if the forecast costs of fulfilling the contract throughout the contract period exceed the forecast income receivable. In assessing the amount of the loss to provide on an outsourcing contract, account is taken of the Group s share of the forecast results from any joint ventures which the contract is servicing. Interest income Interest income is recognised on a time apportionment basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. Dividend income Dividend income is recognised when the right to receive payment is established.

125 Financial Statements 123 Notes to the Financial Statements continued Pre-contract costs The Group accounts for all pre-contract costs in accordance with IAS 11, Construction contracts. Costs incurred before it becomes probable that a contract will be obtained are charged to expenses. Directly attributable costs incurred after that point are recognised in the balance sheet and charged to the income statement over the duration of the contract or, in the case of PPP/PFI concessions, over the same period as the Group s interest in any special purpose company (SPC) charges the equivalent capitalised amounts to the income statement. Bid recovery fees are deferred and credited to the income statement over the duration of the contract or, in the case of PPP/PFI concessions, over the same period as the Group s interest in any SPC credits the equivalent capitalised amounts to the income statement. Where the Group s interest in any SPC reduces, the deferred bid recovery fees are credited to the income statement in proportion to the reduction of the Group s interest. Exceptional items Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are items of income or expense that have been shown separately due to the significance of their nature or amount. Strategic Report Exceptional items are also summarised by class in the segmental analyses, excluding those that relate to interest and tax. Retirement benefit schemes The Group operates various post-employment schemes, including both defined contribution and defined benefit pension plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that typically defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. For the defined benefit plan, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the Consolidated Balance Sheet with a charge or credit recognised in other comprehensive income in the period in which it occurs. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit pension costs are categorised as follows: service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements) net interest expense or income remeasurement. The net retirement benefit liabilities recognised in the Consolidated Balance Sheet represents the actual deficit in the Group s defined benefit plan. Financial Statements For defined contribution plans, the Group pays contributions into a separate entity. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or reduction in the future payments is available. Share-based payments The Group operates a number of equity and cash settled share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) or cash (phantom allocations) of the Group. In accordance with IFRS 2, Share-based payments, the cost of share-based payments awarded after 7 November 2002 is charged to the income statement over the performance and vesting periods of the instruments. The cost is based on the fair value of the awards made at the date of grant adjusted for the number of awards expected to vest. In accordance with the transitional provisions within IFRS 2, no charge is made in respect of instruments awarded before 7 November In the case of equity settled awards, the credits associated with the amounts charged to the income statement are included in retained earnings/accumulated losses until the awards are exercised. In the case of cash settled awards, the credits associated with the amounts charged to the income statement are held as a liability in the balance sheet until the awards are transferred, at which point a cash amount (based on the Company s share price at the vesting date) is paid to the employee. Where awards are settled by the new issue of shares, any proceeds received in respect of share options are credited to share capital and share premium. Where awards are settled in shares held by the EBTs, any proceeds are credited to retained earnings/accumulated losses. Corporate Information

126 124 Financial Statements Notes to the Financial Statements continued Share awards are granted by the Company to employees of its subsidiaries. The Company charges to cost of investment in subsidiaries an amount equivalent to the equity settled element of the annual IFRS 2 charge, with an equivalent credit to reserves in accordance with IFRIC 11, Group and treasury share transactions. Income tax Current and deferred income tax are recognised in the income statement for the period except where the taxation arises as a result of a transaction or event that is recognised in other comprehensive income or directly in equity. Income tax arising on transactions or events recognised in other comprehensive income or directly in equity is charged or credited to other comprehensive income or directly to equity respectively. The current income 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 Company and its subsidiaries operate and generate taxable income. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle balances on a net basis. No deferred tax is recognised on the unremitted earnings of overseas subsidiaries, branches and joint ventures, except where it is known that the earnings will be distributed. Deferred tax assets of 3.7m have not been recognised due to the uncertainty of timing of utilisation. Intangible assets Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the fair value of the consideration given for a business over the Company s interest in the net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree. Goodwill is stated at cost less accumulated impairment. Prior to 1 April 2004, goodwill was amortised over its estimated useful economic life. Amortisation ceased on 1 April 2004 and the carrying value of existing goodwill was frozen at that date and is subject to impairment reviews. For the purpose of impairment testing, goodwill acquired in a business acquisition is allocated to each of the cash generating units (CGUs), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill that arose prior to 1 April 1997 was written off to retained earnings/accumulated losses. Profit or loss on disposal of the underlying businesses to which this goodwill related will not include goodwill previously recorded as a deduction from equity. Acquired customer relationships Acquired customer relationships consist of intangible assets arising on the consolidation of recently acquired businesses, that are separable from goodwill, in accordance with IFRS 3, Business combinations, and IAS 38, Intangible assets, and do not fall within the Group s other classes of intangible assets. These comprise principally existing customer relationships which may give rise to future orders (customer relationships), and existing order books (backlog orders).

127 Financial Statements 125 Notes to the Financial Statements continued Acquired customer relationships are recognised at fair value at the acquisition date and have a finite useful life. Amortisation of customer relationships is calculated using the straight line method to allocate the cost of customer relationships over their estimated useful lives of between one and twenty years. Acquired customer relationships are stated at cost less accumulated amortisation and impairment. Backlog orders are recognised at fair value at the acquisition date and amortised over their estimated useful lives of three years. Backlog orders are stated at cost less accumulated amortisation and impairment. Software licences Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised using the straight line method to allocate the cost of the software licences over their useful lives of between two and five years. Software licences are stated at cost less accumulated amortisation. Corporate information systems In accordance with IAS 38, Intangible assets, the Group s corporate information systems are treated as an intangible asset. Costs included are those directly attributable to the design, construction and testing of new systems (including major enhancements and internally generated costs) from the point of inception to the point of satisfactory completion where the probable future economic benefits arising from the investment can be assessed with reasonable certainty at the time the costs are incurred. Maintenance and minor modifications are expensed in the income statement as incurred. The corporate information systems recognised as assets are amortised using the straight line method to allocate the cost of the corporate information systems over their estimated useful life of six years. Corporate information systems are stated at cost less accumulated amortisation. Trade names and trademarks Trade names and trademarks have arisen on the consolidation of recently acquired businesses and are recognised at fair value at the acquisition date. Where trade names and trademarks are considered to have a finite useful life, amortisation is calculated using the straight line method to allocate the cost of trade names and trademarks over their estimated useful lives. Where trade names and trademarks are considered to have an indefinite useful life, they are not subject to amortisation; they are tested annually for impairment and when there are indications that the carrying value may not be recoverable, as detailed within the impairment of non-financial assets section below. Trade names and trademarks are stated at cost less accumulated amortisation and impairment. Strategic Report Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and impairment. Cost comprises purchase price after discounts and rebates plus all directly attributable costs of bringing the asset to working condition for its intended use. 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. Land is not depreciated. Depreciation on other assets is calculated using the straight line method to write off the cost less residual value of each asset over its estimated useful life, as follows: Freehold buildings 10 to 50 years Short term leasehold property over the life of the lease Plant, machinery and vehicles 3 to 12 years Financial Statements The assets useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within administrative expenses in the income statement. Impairment of non-financial assets Assets that have an indefinite useful life, such as goodwill, are not subject to amortisation and are tested annually for impairment and when there are indications that the carrying value may not be recoverable. Assets that are subject to amortisation are reviewed for impairment wherever 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 purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows (CGUs). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date. Corporate Information

128 126 Financial Statements Notes to the Financial Statements continued Financial assets Classification The Group classifies its financial assets into the following categories: at fair value through profit or loss, loans and receivables, and availablefor-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm s length basis. The quoted market price used for financial assets held by the Group is the mid market price. These instruments are included in Level 1, see note 2. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2, see note 2. Loans 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 where the maturity is greater than 12 months after the balance sheet date, in which case they are included as non-current assets. The Group s loans and receivables comprise trade and other receivables, cash and cash equivalents, and other receivables in the balance sheet. Other receivables include loan notes receivable. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade date the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the right to receive cash flows from the investments has expired or has been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Trade receivables are recognised at original invoice amount less provision for impairment which, due to their short term nature, approximates to their fair value. Other receivables include loan notes receivable, which are measured at amortised cost using the effective interest method less any provision for impairment. This valuation approximates to their fair value. Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in the income statement in the period in which they arise. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement. Interest on available-for-sale financial assets calculated using the effective interest method is recognised in the income statement as part of finance income. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

129 Financial Statements 127 Notes to the Financial Statements continued Impairment of financial assets Assets carried at amortised cost The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in payments, the probability that they will enter bankruptcy or financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Any impairment is charged to the income statement. Impairment testing for trade receivables is described below in the accounting policy paragraph relating to trade receivables. For other receivables carried at amortised cost, impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the Consolidated Income Statement. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in the Consolidated Income Statement. Assets classified as available-for-sale The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. The Group uses the criteria referred to above. If any evidence of impairment exists, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss is removed from equity and recognised in profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the Consolidated Income Statement. Strategic Report Inventories Inventories are stated at cost less impairment. Cost is determined using the first in, first out method. Trade receivables Trade receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised at fair value. 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. Cash and cash equivalents Cash and cash equivalents include cash in hand, demand deposits and other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Derivative financial instruments and hedging activities Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge). The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. The fair values of various derivative instruments used for hedging purposes are disclosed in note 23. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Financial Statements Corporate Information Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the Consolidated Income Statement.

130 128 Financial Statements Notes to the Financial Statements continued Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the forecast cash flow that is hedged takes place). When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast cash flow is ultimately recognised in the Consolidated Income Statement. When a forecast cash flow is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the Consolidated Income Statement. Lease obligations Finance leases Lease arrangements that transfer substantially all the risks and rewards of ownership to the lessee are treated as finance leases. Assets held under finance leases are capitalised within property, plant and equipment at the lease s commencement and depreciated over the shorter of the lease term and the useful life of the asset. A liability is recognised for the present value of the minimum lease payments within current and/or non-current liabilities as appropriate. Rental payments are apportioned between capital and interest expense to achieve a constant rate of interest charge on the outstanding obligation. Operating leases Where the Group acts as lessee in an operating lease arrangement, the lease payments are charged as an expense to the income statement on a straight line basis over the lease term. Lease incentives received are also recognised on a straight line basis over the lease term. Where the Group acts as lessor in an operating lease arrangement, rental income from operating leases is accounted for on a straight line basis over the period of the lease. Lease incentives provided are also recognised over the lease term on a straight line basis. Trade payables 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 (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised at fair value. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried 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. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. Provisions for other liabilities and charges Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Vacant property provisions are recognised when the Group has committed to a course of action that will result in the property becoming vacant. The provision is calculated based on projected discounted cash flows to the end of the lease, after making assumptions for void and rent free periods. The pre-tax rate used reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Dividend distribution Dividend distribution to the Company s shareholders is recognised as a liability in the Group s Financial Statements in the period in which the dividends are approved by the Company s shareholders. Interim dividends are recognised when paid. Disposal groups held for sale Disposal groups are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.

131 Financial Statements 129 Notes to the Financial Statements continued 2. Financial risk management Financial risk factors The Group s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board of directors. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and investment of excess liquidity. These policies are further described within the Treasury policies and objectives section of the Business Review (page 42). Strategic Report Where individual sensitivities are disclosed below, all other variables are held constant. a) Market risk Financial instruments affected by market risk include borrowings, deposits and derivative financial instruments. The following foreign exchange risk and interest rate risk analyses, required by IFRS 7, Financial Instruments: Disclosures, are intended to illustrate the sensitivity to changes in market variables, being primarily the US dollar to sterling and euro to sterling exchange rates and UK interest rates. The following assumptions were made in calculating the sensitivity analyses: changes in the carrying value of derivative financial instruments designated as hedges are fully effective with no impact on the Consolidated Income Statement changes in the carrying value of other financial instruments not in hedging relationships only affect the Consolidated Income Statement. i) Foreign exchange risk The Group operates in a number of international territories. Each business undertakes a large proportion of its commercial transactions within its local market and in its local functional currency. Foreign exchange 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. Group policy is for each business to undertake commercial transactions in its own functional currency whenever possible. When this is not possible, the Group manages its foreign exchange risk from future commercial transactions using appropriate derivative contracts arranged via Group Treasury. Cash flows are reviewed on a monthly basis throughout the duration of projects and the future cover amended as appropriate. Trade receivables and payables denominated in currencies other than the local functional currency arise from commercial transactions and are therefore largely hedged as part of the process described above. Remaining financial assets and liabilities denominated in currencies other than the local functional currency include bank accounts, loans and intercompany funding balances. These are generally unhedged, with the exception of balances that are themselves designated as hedging instruments used to hedge the Group s investments in foreign operations. Financial Statements The Group s primary exposure to foreign exchange risk on unhedged financial instruments arises mainly in respect of movements between the US dollar (including dollar pegged currencies) and sterling and between the euro and sterling. At 31 March, if sterling had strengthened by a reasonably possible change of 10% against the US dollar, post-tax profit for the year would have been lower by approximately 0.3m (: 1.7m) and equity would have been 0.3m lower (: 1.7m). If sterling had weakened by a reasonably possible change of 10% against the US dollar, post-tax profit for the year would have been higher by approximately 0.4m (: 2.1m) and equity would have been 0.4m higher (: 2.1m). At 31 March, if sterling had strengthened by a reasonably possible change of 10% against the euro, post-tax profit for the year would have been lower by approximately 0.7m (: 0.3m) and equity would have been 0.7m lower (: 0.3m). If sterling had weakened by a reasonably possible change of 10% against the euro, post-tax profit for the year would have been higher by approximately 0.8m (: 0.4m) and equity would have been 0.8m higher (: 0.4m). Corporate Information The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. A proportion of the currency exposure arising from the net assets of the Group s foreign operations is managed through borrowings denominated in the relevant foreign currencies.

132 130 Financial Statements Notes to the Financial Statements continued ii) Interest rate risk The Group s exposure to interest rate risk arises from cash and cash equivalents and financial assets at fair value through profit or loss which are all interest bearing, offset in part by interest bearing bank loans. The majority of these items are at floating rates of interest or fixed deposits for periods of less than six months; changes in the interest rate results in changes in interest-related cash flows. No interest hedging is currently undertaken by the Group or its subsidiaries. If interest rates for the year to 31 March had been 10 basis points higher/lower, post-tax profit for the year would have been approximately 0.1m (: 0.1m) higher/lower. iii) Price risk Price risk is the risk that a decline in the value of assets adversely impacts the profitability of the Group. The Group is exposed to equity securities price risk because of investments held by the Group and classified on the Consolidated Balance Sheet as financial assets at fair value through profit or loss. To manage this risk, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with limits set by the Group. In the prior year, the Group was also exposed to price risk because of investments held by the Group in unlisted corporate bonds (availablefor-sale financial assets). These investments were disposed of during the prior year. Management monitors exposures to price risk on an ongoing basis. The Group is not materially exposed to commodity price risk. Certain longer term project and framework contracts include indexation clauses that are applied to unit rates to offset the effect of inflation on input costs over the duration of the agreement. The Group is exposed to price risk to the extent that inflation differs from the index used and forecast project outcomes that form the basis of revenue recognition include an estimate of this risk where it is present. b) Credit risk Credit risk is the risk that the Group will suffer financial loss as a result of counterparties defaulting on their contractual obligations. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions, with the maximum exposure to the risk equivalent to 100% of the carrying value disclosed in the Group s balance sheet at 31 March. The Group does not hold any collateral as security. The Group s policy is that cash and investments should not be concentrated with any one counterparty. For trade and other receivables, concentration of credit risk is very limited due to the Group s broad customer base. An assessment of credit quality of the customer is made where appropriate using a combination of external rating agencies, past experience and other factors. In circumstances where credit information is unavailable or poor, the risk is mitigated primarily by the use of advance payments resulting in positive cash flows. Exposure and payment performance are monitored closely both at individual project and client level, with a series of escalating debt recovery actions taken where necessary. In view of current economic circumstances, additional management attention remains focused on the recovery of debtors. c) Liquidity risk The Group funds its activities through cash generated from its operations and, where necessary, borrowings and finance leases. The Group s borrowing facilities include bank facilities and private placement debt. Cash flow forecasting is performed in the operating entities of the Group and aggregated by a central finance department (Group Finance). Group Treasury monitors rolling forecasts of the Group s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (note 29) at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group s debt financing plans and covenant compliance. Any surplus cash is invested by Group Treasury in interest bearing current accounts, term deposits and money market deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the forecasts mentioned above.

133 Financial Statements 131 Notes to the Financial Statements continued The table below analyses the Group s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. On demand or within 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years Group Finance leases Bank loans Private placement debt Trade payables On demand or within 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years Finance leases Bank loans Private placement debt Trade payables On demand or within 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years Total Total Company Bank loans Private placement debt Intercompany payables On demand or within 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years Bank loans Private placement debt Intercompany payables The contractual cash flows in each year include the borrowings maturing in that year together with forecast contractual interest payments on those borrowings. Interest is estimated using the prevailing rate at the balance sheet date. Cash flows in foreign currencies are translated at the spot rates at the balance sheet date. Total Total Strategic Report Financial Statements Corporate Information

134 132 Financial Statements Notes to the Financial Statements continued d) Concentrations of financial instruments The carrying amounts of the Group s financial assets and liabilities, excluding derivative financial instruments, were denominated in the following currencies: Financial assets Financial liabilities Financial assets Financial liabilities Sterling US dollar UAE dirham China RMB Euro Qatari riyal HK dollar Saudi Arabian riyal Australian dollar Danish krone Swedish krone Other Total The carrying value of the financial assets of the Company are denominated in US dollars ( 103.6m) and sterling ( 62.1m). The carrying value of the financial liabilities of the Company are denominated in US dollars ( 100.7m) and sterling ( 78.6m). At 31 March, the carrying value of the financial assets of the Company were denominated in US dollars ( 109.9m) and sterling ( 55.6m). The carrying value of the financial liabilities of the Company at that date were denominated in US dollars ( 109.1m) and sterling ( 82.0m). Financial assets consist of loan notes; trade receivables (net); intercompany receivables (nil in consolidated accounts); amounts due from joint ventures; financial assets at fair values through profit or loss; cash and cash equivalents. Financial liabilities consist of trade payables; intercompany payables (nil in consolidated accounts); and borrowings. Capital risk management The Group s objectives when managing capital are to safeguard the Group s ability to continue 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 cost of capital. The Group maintains or adjusts its capital structure through the payment of dividends to shareholders and through its borrowing facilities. The Group monitors capital on the basis of the ratio of its net debt plus net defined benefit pension deficit net of total deferred tax to adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA). This policy is unchanged from the prior year.

135 Financial Statements 133 Notes to the Financial Statements continued The ratios of net debt plus net defined benefit pension deficit net of total deferred tax to adjusted EBITDA at 31 March and were as follows: Group Restated Note Total borrowings Less: cash and cash equivalents 28 (237.3) (201.5) Net funds (136.5) (92.3) Net defined benefit pension deficit Net deferred tax 20 (67.2) (71.4) Net debt plus net defined pension deficit net of total deferred tax Profit before interest and tax Add: depreciation Add: amortisation and impairment EBITDA Less: exceptional item 12 (4.3) Adjusted EBITDA Ratios of net debt plus net defined benefit pension deficit net of total deferred tax to adjusted EBITDA As detailed in note 1, during the year the Group adopted and retrospectively applied IAS 19 (revised 2011). As a result, profit before interest and tax, net defined benefit pension deficit and net deferred tax for the year ended 31 March have been restated accordingly. See notes 20, 32 and 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group. Strategic Report Given the Group s current net funds position, the Board has not formally agreed a target ratio of net debt plus net defined benefit pension deficit net of total deferred tax to adjusted EBITDA. Fair value estimation The table below analyses the Group s financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2). The following table presents the Group s assets and liabilities that are measured at fair value at 31 March and. See note 11 for disclosures of the disposal group held for sale at 31 March that was measured at fair value. Level 1 Level 2 Total Level 1 Level 2 Assets Derivatives used for hedging Foreign exchange contracts Financial assets at fair value through profit or loss Marketable securities Certificates of deposit Fixed interest securities Life insurance policies Floating rate notes UK treasury bills Total assets Total Financial Statements Corporate Information Liabilities Derivatives used for hedging Foreign exchange contracts Total liabilities There have been no changes to the classification of the Group s financial instruments carried at fair value between Level 1 and Level 2 at 31 March or.

136 134 Financial Statements Notes to the Financial Statements continued Level 1 financial instruments The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm s length basis. The quoted market price used for financial assets held by the Group is the mid market price. Level 2 financial instruments The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. The fair value of certificates of deposit is calculated as the present value of the future cash flows, discounted at an appropriate market rate of interest. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the reporting date and yield curves derived from quoted interest rates matching the maturities of the foreign exchange contracts. Specific valuation techniques used to value financial instruments include: the fair value of derivatives used for hedging are provided by The Royal Bank of Scotland, HSBC and Bank of America Merrill Lynch the fair value of all marketable securities, with the exception of life insurance policies, are provided by the financial institutions holding the Group s funds and investments the fair value of all life insurance policies are provided by the Group s insurance companies. Offsetting financial assets and financial liabilities As at 31 March Gross amounts of recognised financial assets/ (liabilities) Gross amounts of recognised financial assets/ (liabilities) set off the balance sheet Net amounts of financial assets/ (liabilities) presented in the balance sheet Related amounts not set off in balance sheet Financial instruments Cash collateral received Net amount Derivative financial assets (0.1) 0.3 Derivative financial liabilities (4.4) (4.4) 0.1 (4.3) Cash and cash equivalents (12.1) Credit balance (12.1) 12.1 Total As at 31 March Gross amounts of recognised financial assets/ (liabilities) Gross amounts of recognised financial assets/ (liabilities) set off the balance sheet Net amounts of financial assets/ (liabilities) presented in the balance sheet Related amounts not set off in balance sheet Financial instruments Cash collateral received Net amount Derivative financial assets (0.3) 0.5 Derivative financial liabilities (2.7) (2.7) 0.3 (2.4) Cash and cash equivalents (24.5) Credit balance (24.5) 24.5 Total

137 Financial Statements 135 Notes to the Financial Statements continued 3. Segmental information The CODM has been identified as the chief executive officer and the Group finance director. The chief executive officer and the Group finance director review the Group s internal reporting to assess performance and allocate resources. Management has determined the operating segments based on these reports. Following a change in its operational management, the Group has amended its operating segments for reporting purposes to reflect the United Kingdom and Europe as one segment; previously Europe had been managed and reported with Asia Pacific. The revised segments are: United Kingdom and Europe, North America, Middle East, Asia Pacific and Energy. The segmental results and assets for the comparative year ended 31 March have been represented in line with these revised segments. The chief executive officer and the Group finance director assess the performance of the operating segments based on operating profit before interest and tax. Information provided to the chief executive officer and the Group finance director is measured in a manner consistent with that in the Financial Statements. a) Group business segments Revenue and results External revenue Inter segment trade Operating profit Operating margin % Share of post-tax profit/(loss) from joint ventures Revenue United Kingdom and Europe North America Middle East (9.5) Asia Pacific (0.3) Energy (13.9) (0.5) Total for segments 1, , (0.2) Group items: Joint ventures reported above (64.6) (64.6) 0.2 Unallocated central items (3.0) (3.0) (5.7) 2.6 Total for Group 1, , External revenue Inter segment trade Operating profit Operating margin % Share of post-tax profit from joint ventures Restated Revenue United Kingdom and Europe North America Middle East (6.1) Asia Pacific 88.1 (0.1) Energy (11.0) Total for segments 1, , Group items: Joint ventures reported above (63.7) (63.7) (1.5) Unallocated central items (5.7) 2.3 Total for Group 1, , Unallocated central items comprise a 3.0m provision relating to the previously disposed of Asset Management business and 2.7m of intangible asset amortisation relating to the acquisitions of The PBSJ Corporation (PBSJ) and Confluence Project Management Pte. Ltd. (Confluence), see note 17 (: 4.3m relating to a pension curtailment gain and 10.0m of intangible asset amortisation and impairment relating to the acquisition of PBSJ). Corporate Information Financial Statements Strategic Report Total segment revenue of 1,817.7m (: 1,768.9m) excludes the share of joint venture revenue from Diego Garcia of 0.5m (: 6.6m), which is treated as a centrally managed joint venture. Total segment revenue also excludes the 3.0m provision relating to the previously disposed of Asset Management business, refer above (: nil).

138 136 Financial Statements Notes to the Financial Statements continued Reconciliation of segmental analysis to profit for the year attributable to owners of the parent and non-controlling interests: Restated Operating profit Net profit on disposal of businesses/non-controlling interests Income from other investments 1.2 Share of post-tax profit from joint ventures Profit before interest and tax Finance income Finance costs (17.8) (17.7) Net finance costs (13.6) (14.3) Profit before tax Income tax expense (17.9) (13.7) Profit for the year Profit/(loss) attributable to: Owners of the parent Non-controlling interests 0.3 (0.3) As detailed in note 1, during the year the Group adopted and retrospectively applied IAS 19 (revised 2011). As a result, operating profit, finance costs and income tax expense in the Consolidated Income Statement for the year ended 31 March have been restated accordingly. Consequently, the results of the United Kingdom and Europe operating segment have also been restated for that year. See note 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group. Balance sheet Total segment assets Total segment liabilities Investments Net assets/ in joint (liabilities) ventures Capital expenditure Depreciation, amortisation and impairment United Kingdom and Europe (280.8) North America (71.4) Middle East (51.2) Asia Pacific 59.0 (43.1) Energy 74.4 (28.1) 46.3 (0.6) Total for segments 1,067.3 (474.6) Group items: Unallocated central items 12.9 (475.4) (462.5) 2.7 Total for Group 1,080.2 (950.0)

139 Financial Statements 137 Notes to the Financial Statements continued Total segment assets Total segment liabilities Net assets/ (liabilities) Investments in joint ventures Capital expenditure Depreciation, amortisation and impairment Restated United Kingdom and Europe (315.7) North America (91.5) Middle East (57.7) Asia Pacific 49.4 (44.7) Energy 73.4 (30.3) 43.1 (0.1) Total for segments 1,097.0 (539.9) Group items: Unallocated central items 16.7 (427.5) (410.8) Total for Group 1,113.7 (967.4) As detailed in note 1, during the period the Group adopted and retrospectively applied IAS 19 (revised 2011). As a result, operating profit for the year ending 31 March reduced by 0.1m, which impacted the results of the United Kingdom and Europe operating segment. Consequently, the segmental results for the year ended 31 March have also been restated. See note 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group. Assets and liabilities are allocated based on the operations of the segments and the physical location or territory of the asset or liability. Group cash balances; derivative financial instruments; financial assets at fair value through profit or loss; centrally managed joint ventures; and corporate assets are not considered to be segment assets as they are managed centrally. Consequently they are shown within unallocated central items. Strategic Report Similarly, post-employment benefit liabilities; bank loans and private placement debt; derivative financial instruments; central tax provisions; and corporate liabilities are not considered to be segment liabilities as they are managed centrally. Consequently they are shown within unallocated central items. Capital expenditure includes additions to goodwill, other intangible assets and property, plant and equipment. b) Group geographical segments External revenue is measured by location of operation. There was no material difference between geographic revenue by location of operation and by location of customer. The Group considers the UK to be its country of domicile. Outside the UK, only the Group s business in the United States (US) contributes more than 10% of the Group s revenue or non-current assets. Revenue Non-current assets UK US Other Total for Group 1, , Non-current assets exclude deferred tax assets and derivative financial instruments. c) Major customers Revenue from the UK Government represents approximately 181.1m (: 206.5m) of the Group s total revenue and is included within the United Kingdom and Europe and Energy operating segments. Financial Statements Corporate Information

140 138 Financial Statements Notes to the Financial Statements continued 4. Joint ventures a) Share of post-tax profit from joint ventures Group Revenue Operating expenditure (62.5) (66.1) Operating profit Finance income Finance costs Profit before tax Income tax expense (0.2) (0.4) Share of post-tax profit from joint ventures b) Investments in joint ventures Group Non-current assets Other non-current assets Current assets Cash and cash equivalents Other current assets Current liabilities Borrowings (0.9) Trade and other payables (33.0) (36.4) (33.9) (36.4) Non-current liabilities Other non-current liabilities (0.2) (1.2) (0.2) (1.2) Share of net assets Investments in joint ventures The Group s principal joint ventures are detailed in note 43.

141 Financial Statements 139 Notes to the Financial Statements continued 5. Operating profit analysis of costs by nature Group Note Operating profit is arrived at after charging/(crediting): Employee benefit costs (restated) Net foreign exchange losses/(gains) 0.8 (1.6) Depreciation of property, plant and equipment Loss on sale of property, plant and equipment 0.4 Loss on sale of intangible assets 0.1 Impairment of trade receivables/(reversal of impairment) increase in provisions release of provisions 26 (10.0) (8.7) Amortisation and impairment of intangibles Receipts under operating leases (3.4) (3.9) Payments under operating leases Strategic Report Company operating profit was arrived at after generating nil of realised profit on disposal of investments (: 9.0m). Services provided by the Group s auditor During the year the Group (including its overseas subsidiaries) obtained the following services from the Group s auditor: Group Restated Statutory audit of the Company and Group Financial Statements The audit of accounts of Group companies pursuant to legislation: UK Non-UK Audit related assurance services Total audit services Taxation compliance services Taxation advisory services Financial Statements Services relating to pensions 0.1 Other Total other services Total The fee for the statutory audit of the Company s annual accounts was 0.1m (: 0.1m). No other services were provided to the Company by the Group s auditor (: none). The total for other non-audit services for the year ended 31 March was stated to be 0.2m. It has subsequently transpired that some fees had been incorrectly classified and hence the numbers have been restated. This included approximately 143,000 that was incorrectly identified as fees paid to the independent auditor and was in fact paid to other third parties so this has been removed from the restated numbers. Corporate Information

142 140 Financial Statements Notes to the Financial Statements continued 6. Employee benefit costs Number Average Restated Number Number Year end Restated Number Number of full time equivalent people (including executive directors) employed by the Group By segment: United Kingdom and Europe 9,002 9,208 8,858 9,354 North America 2,970 3,091 2,836 3,039 Middle East 1,982 2,003 2,061 1,978 Asia Pacific 1,167 1,015 1,322 1,084 Energy 1,331 1,213 1,365 1,273 Corporate Total for Group 16,530 16,600 16,519 16,804 As detailed in note 3, following a change in its operational management, the Group has amended its reporting segments for management purposes to reflect the United Kingdom and Europe as one segment; previously Europe had been managed and reported with Asia Pacific. The average and year end number of full time equivalent people (including executive directors) employed by the Group for the comparative year ended 31 March for the United Kingdom and Europe and Asia Pacific have been represented in line with these revised segments. Aggregate employee benefit costs of those people amounted to: Group Restated Note Wages and salaries, including restructuring costs Social security costs Defined benefit current service cost Settlement and curtailment gains 32 (4.4) Charge for defined contribution schemes Other post-employment benefit costs Share-based payments As detailed in note 1, during the year the Group adopted and retrospectively applied IAS 19 (revised 2011), which reduced the defined benefit current service cost. The cost for the year ended 31 March has been restated accordingly from 2.2m to 2.1m. See note 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group. Wages and salaries include 3.5m of restructuring costs (: 5.4m) relating to continuing operations. Details of remuneration (including retirement benefits) and interests for directors are included in the Remuneration Report, which forms part of these Financial Statements. Details of remuneration for key management are included in note 41.

143 Financial Statements 141 Notes to the Financial Statements continued 7. Net finance costs Group Restated Note Interest payable on borrowings Interest payable on finance lease liabilities 0.3 Unwinding of discount Net finance costs on net post-employment benefit liabilities Other finance costs Finance costs Interest receivable on short term deposits (1.0) (1.1) Interest income on financial assets at fair value through profit or loss (0.1) (0.7) Income on available-for-sale financial assets (0.3) Interest receivable on loan notes (3.1) (1.3) Finance income (4.2) (3.4) Net finance costs As detailed in note 1, during the year the Group adopted and retrospectively applied IAS 19 (revised 2011), which increased net finance costs. Net finance costs on net post-employment benefit liabilities for the year ended 31 March have been restated accordingly from 8.1m to 13.3m; total net finance costs have been restated from 9.1m to 14.3m. See note 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group. In the prior year, finance income of 1.4m arising on loan notes receivable from Lambert Smith Hampton Acquisition Limited (LSH) had been provided against in full within interest receivable on loan notes. See note 24 for further details regarding these loan notes receivable. Strategic Report Company net finance costs were 2.6m (: 2.2m). 8. Income tax expense a) Analysis of charge in the year Group Restated Note Current income tax current tax on profits for the year adjustment in respect of prior years (2.0) (3.6) Deferred income tax 20 origination and reversal of temporary differences effect of changes in tax rates Income tax charged to income statement Adjust for: taxation on net profit on disposal of businesses/non-controlling interests taxation on exceptional items (1.0) taxation on amortisation and impairment of acquired intangibles Underlying income tax expense Profit before tax per income statement Adjust for: net profit on disposal of businesses/non-controlling interests (10.5) (4.5) amortisation and impairment of acquired intangibles exceptional items (4.3) Underlying profit before income tax Financial Statements Corporate Information Effective income tax rate 15.7% 14.0% Underlying effective income tax rate 19.0% 17.1% The restatement of the effective income tax rate and the underlying effective income tax rate for the year ended 31 March is due to the adoption and retrospective application by the Group of IAS 19 (revised 2011). See note 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group.

144 142 Financial Statements Notes to the Financial Statements continued b) Factors affecting income tax rate The income tax rate for the year is lower (: lower) than the standard rate of corporation tax in the UK of 23% (: 24%). The differences are explained below: Group Restated % % UK statutory income tax rate Increase/(decrease) resulting from: Expenses not deductible for tax purposes Adjustment in respect of overseas tax rates 2.5 (0.2) Effect of share-based payments Tax on joint ventures (0.9) (1.4) Research and development tax credits (6.0) (5.9) Losses not previously recognised for tax (5.5) (3.7) Effect of change in tax rates Other (0.5) (0.8) Effective income tax rate The underlying income tax rate for the year is lower (: lower) than the standard rate of corporation tax in the UK of 23% (: 24%). The differences are explained below: Group Restated % % UK statutory income tax rate Increase/(decrease) resulting from: Expenses not deductible for tax purposes Adjustment in respect of overseas tax rates Effect of share-based payments Tax on joint ventures (1.0) (1.4) Research and development tax credits (6.4) (5.9) Losses not previously recognised for tax (3.3) (3.7) Effect of change in tax rates Other (0.7) (0.7) Underlying effective income tax rate As noted in (a) above, the restatement of the effective income tax rate and the underlying effective income tax rate for the year ended 31 March is due to the adoption and retrospective application by the Group of IAS 19 (revised 2011). See note 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group.

145 Financial Statements 143 Notes to the Financial Statements continued c) Income tax on components of other comprehensive income The tax credit/(charge) relating to components of other comprehensive income is as follows: Postemployment benefit liability Cash flow hedges At 1 April Deferred income tax Current income tax At 31 March Postemployment benefit liability Cash flow hedges At 1 April Deferred income tax (restated) Current income tax (0.3) (0.3) At 31 March Income tax on the post-employment benefit liability for the year ended 31 March has been restated due to the adoption and retrospective application by the Group of IAS 19 (revised 2011). See note 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group. 9. Net profit on disposal of businesses/non-controlling interests Group Profit/(loss) on disposal of businesses UK highways services 13.0 UK highways services transaction costs released/(incurred) 0.6 (3.8) Transfer of ongoing operations of Peter R. Brown Construction, Inc. (3.1) Sodexo Property Solutions Limited (formerly Atkins Facilities Management Limited) 0.5 Profit on disposal of non-controlling interests RMPA Holdings Limited 7.6 UK Specialist Hospitals Limited 0.2 Net profit on disposal Group Total Group Total Strategic Report Financial Statements Corporate Information

146 144 Financial Statements Notes to the Financial Statements continued Net profit on disposal of businesses UK highways services On 27 February contracts were exchanged to dispose of the Group s UK highways services business, which formed part of the UK highways and transportation business, to Skanska Construction UK Limited (Skanska), a wholly owned subsidiary of Skanska AB. The business was sold for a cash consideration of 16.0m (subject to certain completion adjustments), together with a deferred conditional amount of 2.0m. The profit on disposal before tax recognised at 31 March is shown below: Group Net consideration received or receivable at date of disposal Initial cash consideration 16.0 Fair value of deferred consideration Disposal consideration paid 16.0 Assets and liabilities at date of disposal Property, plant and equipment 5.1 Share of joint venture net assets 0.2 Inventories 1.0 Borrowings (4.7) Net assets 1.6 Profit on disposal before costs 14.4 Disposal costs incurred (1.4) Profit on disposal 13.0 At 31 March, disposal costs of 3.8m were provided for, comprising transaction costs of 2.4m and restructuring costs of 1.4m. Following the conclusion of this transaction in, 0.6m of the restructuring costs were not required and were subsequently released. The disposal of the Group s UK highways services business is not reported as a discontinued operation at 31 March as it did not represent a major line of business. Transfer of ongoing operations of Peter R. Brown Construction, Inc. On 30 August the transfer of the ongoing operations of Peter R. Brown Construction, Inc. (Peter Brown) to Moss & Associates, LLC (Moss) was completed. The business was transferred for a cash consideration payable to Moss of $4.0m ( 2.6m). The loss on disposal before tax was $4.8m ( 3.1m) and is shown below. The disposal of Peter Brown is not reported as a discontinued operation at 31 March as it did not represent a major line of business. The Peter Brown business has been reported in the North America operating segment (note 3). Group $m Net consideration paid or payable at date of disposal Initial cash consideration (4.0) (2.6) Disposal consideration paid (4.0) (2.6) Assets and liabilities at date of disposal Trade and other receivables Net assets Loss on disposal before costs (4.3) (2.8) Disposal costs incurred (0.5) (0.3) Loss on disposal (4.8) (3.1) Sodexo Property Solutions Limited (formerly Atkins Facilities Management Limited) On 30 November 2011, the sale of Atkins Facilities Management Limited (AFML) to Sodexo Limited, a wholly owned subsidiary of Sodexo S.A. was completed. The business was sold for a cash consideration of 5.2m, together with a deferred conditional amount of 0.5m. During the year ended 31 March, deferred conditional consideration of 0.5m was received.

147 Financial Statements 145 Notes to the Financial Statements continued Profit on disposal of non-controlling interests RMPA Holdings Limited In the prior year, on 4 May 2012, the sale of the Group s non-controlling interest (14% holding) in RMPA Holdings Limited to a subsidiary undertaking of HICL Infrastructure Company Limited was completed. HICL Infrastructure Company Limited is the ultimate parent company of an existing shareholder. The interest was sold for a net consideration of 14.4m. The profit on disposal before tax was 7.6m and the profit on disposal after tax was 7.7m. The disposal of the non-controlling interest was not treated as a discontinued operation at 31 March as it did not represent a major line of business. UK Specialist Hospitals Limited In the prior year, on 20 February, the sale of the Group s investment in UK Specialist Hospitals Limited to Care UK Clinical Services Limited was completed. The investment was sold for a cash consideration of 0.2m. The profit on disposal was 0.2m. Strategic Report 10. Business combinations Confluence Project Management Pte. Ltd On 4 October the Group acquired the entire share capital of Confluence Project Management Pte. Ltd (Confluence), a Singapore-based project management business, for a debt-free cash consideration of Singapore $17.0m (approximately 8.4m). Confluence is an international consultancy employing around 200 people, offering services in the areas of project and construction management, and has operations in Asia Pacific, the Middle East and India. Confluence s teams in Singapore, Hong Kong, Abu Dhabi and India have integrated with the Group s existing operations in Asia Pacific and the Middle East. The acquisition complements the Group s Faithful+Gould project and cost management consultancy business and, in particular, augments its presence in the commercial, retail and hospitality sectors. At 31 March the fair value of acquired assets, liabilities and goodwill for this business combination have been determined on a provisional basis, pending finalisation of the post-acquisition review of the fair value of the acquired net assets. Under IFRS 3, Business combinations, adjustments to these provisional values can be made within one year of the date of acquisition relating to facts and circumstances that existed at the acquisition date. The finalised position will be reflected in the Group s financial statements for the year ending 31 March The goodwill of 5.7m arising from the acquisition was allocated to the Asia Pacific segment. None of the goodwill is expected to be deductible for income tax purposes. The goodwill of 5.7m is attributable to the extensive complementary skills which enable the Group s combined operations to provide an enhanced offering to clients in Asia Pacific and the Middle East, which will augment its presence in the commercial, retail and hospitality sectors in particular. The following table summarises the consideration paid for Confluence and the fair value of assets acquired and liabilities assumed at the acquisition date. Consideration at 4 October SGDm Cash Additional payment for assets Total consideration Financial Statements Fair value amounts recognised as of the acquisition date for each major class of assets and liabilities assumed are as follows: SGDm Intangible assets Property, plant and equipment Non-current other receivables Trade and other receivables Cash Trade and other payables (8.6) (4.2) Other post-employment benefit liabilities (0.9) (0.4) Deferred tax liabilities (0.4) (0.2) Total identifiable net assets Goodwill Total consideration paid Corporate Information

148 146 Financial Statements Notes to the Financial Statements continued Acquisition-related costs of 0.6m have been charged to administrative expenses in the Consolidated Income Statement for the year ended 31 March. There were no contingent liabilities as at the date of acquisition. The revenue included in the Consolidated Statement of Comprehensive Income since 4 October contributed by Confluence was 8.7m. Confluence also contributed profit before tax of 0.8m over the same period. Had Confluence been consolidated from 1 April, the Consolidated Income Statement would show revenue of 1,759.1m and profit before tax of 115.1m. 11. Assets held for sale UK highways services In the year ended 31 March, the Group presented the assets and liabilities relating to the Group s UK highways services business, which formed part of the UK highways and transportation business, as held for sale following the exchange of contracts on 27 February. The transaction completed on 4 October and the profit on disposal is shown in note 9. Whilst the assets and liabilities of the UK highways services business represent a disposal group, the business was not reported as a discontinued operation at 31 March as it did not represent a major line of business. The UK highways services business has been reported in the United Kingdom and Europe operating segment (note 3). The major classes of assets and liabilities of this disposal group were as follows: Assets classified as held for sale: Property, plant and equipment 5.0 Inventories 0.8 Total assets of the disposal group 5.8 Liabilities directly associated with assets classified as held for sale: Borrowings (5.2) Total liabilities of the disposal group (5.2) Total net assets of the disposal group Exceptional items Exceptional items are disclosed separately on the face of the Consolidated Income Statement and in the notes to the Financial Statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are items of income or expense that have been shown separately due to the significance of their nature or amount. An analysis of the amount presented as an exceptional item in these Financial Statements is given below: Group Note Curtailment gain relating to one-off pension events The curtailment gain is included within administrative expenses in the Group s Consolidated Income Statement.

149 Financial Statements 147 Notes to the Financial Statements continued 13. Dividends Company and Group pence pence Final dividend paid for the year ended 31 March (2012) Interim dividend paid for the year ended 31 March () Dividends recognised in the year Interim dividend paid for the year ended 31 March () Final dividend proposed for the year ended 31 March () Dividends relating to the year The proposed final dividend is subject to approval by shareholders at the annual general meeting and has not been included as a liability in these Financial Statements. Strategic Report As at 31 March, one EBT had an agreement in place to waive dividends in excess of 0.01 pence per share on 213,461 ordinary shares (: 213,461). A separate EBT also had an agreement in place as at 31 March to waive future dividends in their entirety on 2,311,202 ordinary shares (: 2,618,276). These arrangements reduced the dividends paid in year by 0.8m (: 0.8m). As at 31 March, 4,341,000 ordinary shares (: 4,341,000) were held by the Group as treasury shares on which no dividends are paid. These shares reduced the dividends paid in year by 1.4m (: 1.3m). 14. Earnings per share (EPS) Basic EPS is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the year, excluding shares held by the EBTs which have not unconditionally vested in the employees and shares held in treasury. Diluted EPS is the basic EPS after allowing for the dilutive effect of the conversion into ordinary shares of the number of options outstanding during the year. The options relate to discretionary employee share plans. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below: Number (000) Group Number (000) Number of shares Weighted average number of shares used in basic and underlying basic EPS 97,547 97,425 Effect of dilutive securities share options 2,704 2,412 Weighted average number of shares used in diluted and underlying diluted EPS 100,251 99,837 Note Restated Earnings Profit for the year attributable to owners of the parent Net profit on disposal of businesses/non-controlling interests (net of tax) 9 (12.0) (4.9) Exceptional pension curtailment gain (net of tax) 12 (3.3) Amortisation and impairment of acquired intangibles (net of tax) Underlying earnings pence pence Basic earnings per share Diluted earnings per share Underlying basic earnings per share Underlying diluted earnings per share Financial Statements Corporate Information As detailed in note 1, during the year the Group adopted and retrospectively applied IAS 19 (revised 2011). The profit for the year attributable to owners of the parent and, consequently, underlying earnings for the year ended 31 March have been restated accordingly. See note 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group.

150 148 Financial Statements Notes to the Financial Statements continued 15. Parent Company Income Statement and Statement of Comprehensive Income The Company has not presented its own Income Statement or Statement of Comprehensive Income as permitted by Section 408 of the Companies Act The profit and total comprehensive income for the year attributable to the owners of the parent was 43.7m (: 23.4m), which included 45.4m (: 16.1m) of dividend income from subsidiary companies and no profit on disposal of a subsidiary undertaking (: 0.5m), see note 9. The Company s individual Income Statement and Statement of Comprehensive Income were approved by the Board on 10 June. 16. Goodwill Group Note Cost at 1 April Additions Difference on exchange (13.8) 6.8 Cost at 31 March Aggregate impairment at 1 April Difference on exchange (0.7) 0.4 Aggregate impairment at 31 March Net book value at 31 March Impairment test for goodwill 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 CGU, or group of CGUs, that management has identified in order to carry out impairment tests. Following a change in its operational management, the Group has amended its operating segments for reporting purposes to reflect the United Kingdom and Europe as one segment; previously Europe had been managed and reported with Asia Pacific. The segmental summary of goodwill for the comparative year ended 31 March has therefore been represented in line with the revised segments. The following is a summary of goodwill allocation by CGU or group of CGUs, summarised at the operating segment level: Group Restated United Kingdom and Europe North America Asia Pacific 5.5 Energy Total The impairment test involves comparing the carrying value of the CGU or group of CGUs to which goodwill has been allocated to their recoverable amount. The recoverable amount is based on the higher of fair value less costs to sell and value in use. An impairment loss is recognised immediately when the carrying value of those assets exceeds their recoverable amount. Recoverable amount Fair value less costs to sell is the best estimate of the amount obtainable from the sale of a CGU or group of CGUs in an arm s-length transaction between knowledgeable, willing parties, less the costs of disposal. Value in use is the present value of the future cash flows expected to be derived from the CGU or group of CGUs. Fair value is assessed from an external perspective and value in use from a Group-internal perspective. Both are determined using a business valuation model, taking into account planned future cash flows. If available, third-party valuations are taken as a basis for determining fair value.

151 Financial Statements 149 Notes to the Financial Statements continued Value in use calculations Methodology The internal value in use calculations use cash flow projections based on the following financial year s budget approved by the Board, which is based on past performance and management s expectations of market developments. The key assumptions in the budget relate to revenue and profit margins. Budgeted revenue is based on management s knowledge of actual results from prior years, along with the existing committed and contracted workload, as well as management s future expectations of the level of work available within the market. Profit margins are based on current margins being achieved in conjunction with economic conditions in the market or country of operation. The cash flow projections from that budget are extrapolated for the next four years using an estimated growth rate and projected margin. Growth rates of between 1.7% and 5.4% are based on the economic environment for the country in which the CGU operates. As required by IAS 36, 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 of between 1.8% and 5.3%. These growth rates are derived from the International Monetary Fund s World Economic Outlook published Gross Domestic Product (GDP) growth rates. Projected margins reflect the historical and budgeted performance of the CGU. The projections do not include the impact of future restructuring projects to which the Group is not yet committed. Strategic Report The cash flows have been discounted using the CGUs specific pre-tax discount rates of between 6.7% to 17.9%. The discount rates have been calculated based on the Group s weighted average 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. Assumptions The growth rate and discount rate assumptions used for the internal value in use calculations are as follows: Group Five year growth rate 1.7% 5.4% 1.5% 3.3% Post five year growth rate 1.8% 5.3% 1.7% 3.3% Pre-tax discount rate 6.7% 17.9% 7.7% 15.2% Sensitivities Goodwill of 131.0m (: 141.8m) allocated to the North America operating segment includes 124.1m of goodwill arising on the acquisition of PBSJ. This goodwill has been allocated to the North America group of CGUs and is considered significant in comparison with the Group s total carrying amount of goodwill. The recoverable amount of this group of CGUs has been determined using an internal value in use calculation. The growth rate and discount rate assumptions used for this calculation are as follows: Five year growth rate 2.7% 3.3% Post five year growth rate 2.2% 3.3% Pre-tax discount rate 13.5% 12.4% Given the materiality of goodwill allocated to the North America group of CGUs, together with the relative headroom derived by the calculations, sensitivity analysis has been performed on the key assumptions used in the value in use calculations. The two assumptions to which these calculations are most sensitive are the projected profit margin and the discount rate. Specific sensitivity analysis with regard to these assumptions shows that, with respect to the profit margin, it would need to fall by 180 basis points before any impairment would be triggered, and similarly the pre-tax discount rate would need to increase from 13.5% to 16.6%. For the other CGUs, management has considered the level of headroom resulting from the impairment tests. Where appropriate, further sensitivity analysis has been performed by changing the base case assumptions applicable to each CGU. The analysis has indicated that no reasonably possible changes in any individual key assumption would cause the carrying amount of the business to exceed its recoverable amount. As at 31 March and, based on these valuations, the recoverable value of goodwill required no impairment. Financial Statements Corporate Information

152 150 Financial Statements Notes to the Financial Statements continued 17. Other intangible assets Acquired customer relationships Corporate information systems Trade names and trademarks Software licences Note Cost at 1 April Additions Disposals (2.8) (0.3) (3.1) Difference on exchange Cost at 31 March Additions Acquisition of subsidiary undertakings Disposals (2.0) (4.6) (2.3) (8.9) Difference on exchange (3.8) (0.8) (4.6) Cost at 31 March Accumulated amortisation and impairment at 1 April Amortisation charge for the year Impairment charge for the year Disposals (2.8) (0.2) (3.0) Difference on exchange Accumulated amortisation and impairment at 31 March Amortisation charge for the year Disposals (2.0) (4.6) (2.2) (8.8) Difference on exchange (1.5) (0.7) (2.2) Accumulated amortisation and impairment at 31 March Net book value at 31 March Net book value at 31 March Included within acquired customer relationships are costs of 4.9m (: 5.4m) in respect of backlog orders, arising from the acquisition of PBSJ on 1 October At 31 March, the net book value of these backlog orders is nil (: 0.1m). The remaining amortisation life of the other assets included within acquired customer relationships is 15.5 years. In the prior year, the carrying amounts of acquired customer relationships and trade names and trademarks relating to Peter Brown, a wholly owned subsidiary of the Group, were reduced to recoverable amounts of nil following an impairment review. Impairment charges of 2.6m and 4.8m were recognised respectively, as well as 2.6m amortisation on acquired intangibles, as shown above. These impairment charges were included in administrative expenses in the Consolidated Income Statement. The recoverable amounts of Peter Brown s intangible assets were based on their value in use. The post-tax discount rate used in the value in use calculation was 9.3%. Peter Brown has been reported within the Group s North America operating segment, note 3. The ongoing operations of this business were disposed of on 30 August. Further details regarding this disposal are given in note 9. The amortisation charge for the year of 7.5m (: 6.6m) is included in administrative expenses in the Consolidated Income Statement. Group Total

153 Financial Statements 151 Notes to the Financial Statements continued 18. Property, plant and equipment Freehold land and buildings Short term leasehold property Plant, machinery and vehicles Note Cost at 1 April Additions Disposals (2.3) (8.3) (10.6) Transferred to disposal group classified as held for sale (0.2) (14.8) (15.0) Difference on exchange Cost at 31 March Group Total Strategic Report Additions Acquisition of subsidiary undertakings Disposals (0.3) (1.1) (6.4) (7.8) Difference on exchange (0.5) (1.1) (3.9) (5.5) Cost at 31 March Accumulated depreciation at 1 April Depreciation charge for the year Disposals (2.3) (7.9) (10.2) Transferred to disposal group classified as held for sale (0.1) (9.9) (10.0) Difference on exchange Accumulated depreciation at 31 March Depreciation charge for the year Disposals (0.7) (6.2) (6.9) Difference on exchange (0.1) (0.6) (2.8) (3.5) Accumulated depreciation at 31 March Net book value at 31 March Net book value at 31 March The depreciation charge for the year of 14.7m (: 14.6m) is included in administrative expenses in the Consolidated Income Statement. An independent valuation of the Group s freehold land and buildings was performed by valuers to determine their fair value at 31 March. The market value of freehold land and buildings is estimated at 18.5m (: 17.6m). Financial Statements In the prior year, the net book value of property, plant and equipment transferred to the disposal group classified as held for sale amounted to 5.0m and related to assets used by the Group s UK highways services business, which formed part of the United Kingdom and Europe operating segment. Included in plant, machinery and vehicles above are equipment and vehicles held under finance leases and hire purchase contracts as follows: Cost Accumulated depreciation (0.2) (8.1) Net book value In the prior year, 4.6m was included in plant, machinery and vehicles transferred to the disposal group classified as held for sale were equipment and vehicles used by the Group s UK highways services business held under finance leases. Corporate Information

154 152 Financial Statements Notes to the Financial Statements continued 19. Investments in subsidiaries Company Total Cost at 1 April Additions 8.3 Cost at 31 March Additions 6.6 Cost at 31 March Impairment at 1 April 2012, 31 March 0.8 Disposals Impairment at 31 March 0.8 Net book value at 31 March Net book value at 31 March The Group s principal subsidiaries are disclosed in note 42. During the prior year, the Company increased its investment in Atkins Investments UK Limited to enable it to fulfil its obligation to make shareholder contributions to Connect Plus (M25) Intermediate Limited, see note Deferred income tax Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and there is a legally enforceable right to settle tax assets and liabilities on a net basis. The offset amounts are as follows: Group Restated Deferred tax assets: deferred tax assets to be recovered after more than 12 months deferred tax assets to be recovered within 12 months Deferred tax liabilities: deferred tax liabilities to be settled after more than 12 months (12.1) (16.2) deferred tax liabilities to be settled within 12 months (3.4) (3.9) (15.5) (20.1) Deferred tax assets (net) Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. a) Net deferred tax assets/(liabilities) Group Restated Accelerated depreciation Share-based payments Goodwill (3.2) (1.8) Intangible assets 2.3 Deferred tax asset on post-employment benefit liabilities Deferred income (7.9) (8.1) Amortisation of acquired intangibles (10.9) (12.5) Other temporary differences Total deferred income tax

155 Financial Statements 153 Notes to the Financial Statements continued b) Analysis of movements during the year Group Restated Note Deferred tax assets at 1 April Transfers between current and deferred tax 0.9 Deferred tax charged to the income statement 8 (12.8) (2.3) Deferred tax on acquisitions 10 (0.2) Deferred tax credited to equity Foreign exchange difference on deferred tax 0.4 (0.1) Deferred tax assets at 31 March Strategic Report Finance Act enacted a reduction to the main rate of UK corporation tax to 21% from 1 April and 20% from 1 April As the Finance Act had been enacted as at the balance sheet date, the impact of these reductions have been reflected in the movements in deferred tax as at 31 March. No further reductions to the UK corporation tax rate are currently proposed. 21. Financial instruments Financial instruments by category Loans and receivables Assets at fair value through profit and loss Derivatives used for hedging Group Assets as per balance sheet Derivative financial instruments Other receivables Trade and other receivables excluding prepayments Financial assets at fair value through profit or loss Cash and cash equivalents Total Other financial liabilities at amortised cost Liabilities at fair value through profit and loss Derivatives used for hedging Liabilities as per balance sheet Borrowings excluding finance lease liabilities (100.7) (100.7) Finance lease liabilities (0.1) (0.1) Derivative financial instruments (4.4) (4.4) Trade and other payables excluding non-financial liabilities (254.7) (254.7) Total (355.5) (4.4) (359.9) Total Total Financial Statements Corporate Information

156 154 Financial Statements Notes to the Financial Statements continued Loans and receivables Assets at fair value through profit and loss Derivatives used for hedging Group Assets as per balance sheet Derivative financial instruments Other receivables Trade and other receivables excluding prepayments Financial assets at fair value through profit or loss Cash and cash equivalents Total Other financial liabilities at amortised cost Liabilities at fair value through profit and loss Derivatives used for hedging Liabilities as per balance sheet Borrowings excluding finance lease liabilities (109.1) (109.1) Finance lease liabilities (0.1) (0.1) Derivative financial instruments (2.7) (2.7) Trade and other payables excluding non-financial liabilities (274.9) (274.9) Total (384.1) (2.7) (386.8) Loans and receivables Total Total Company Assets as per balance sheet Trade and other receivables excluding prepayments Cash and cash equivalents Total Other financial liabilities at amortised cost Liabilities as per balance sheet Borrowings (100.7) (100.7) Bank overdraft (2.4) (2.4) Trade and other payables excluding non-financial liabilities (76.2) (76.2) Total (179.3) (179.3) Total Total

157 Financial Statements 155 Notes to the Financial Statements continued Loans and receivables Company Assets as per balance sheet Trade and other receivables excluding prepayments Cash and cash equivalents Total Other financial liabilities at amortised cost Liabilities as per balance sheet Borrowings (109.1) (109.1) Trade and other payables excluding non-financial liabilities (82.0) (82.0) Total (191.1) (191.1) 22. Available-for-sale financial assets Group At 1 April 6.1 Disposals (4.5) Net gains transferred from other comprehensive income (1.6) At 31 March Available-for-sale financial assets comprised unlisted corporate bonds with a fixed annual return of 10% and maturity date of 25 August The bonds were denominated in UAE dirham and were disposed of in the prior year. In addition to the net gain of 1.6m transferred from other comprehensive income to the Consolidated Income Statement in the prior year, a gain on disposal of 0.8m was included within administrative expenses in the Consolidated Income Statement in that year in relation to this disposal. 23. Derivative financial instruments The table below shows the fair value of forward currency contracts at the year end, based on their market value: Group Assets Liabilities Assets Liabilities Current 0.4 (2.7) 0.5 (1.4) Later than one year and no later than two years (0.7) 0.3 (1.3) Later than two years and no later than five years (1.0) Non-current (1.7) 0.3 (1.3) Total 0.4 (4.4) 0.8 (2.7) Total Total Corporate Information Financial Statements Strategic Report

158 156 Financial Statements Notes to the Financial Statements continued The notional principal amounts of the outstanding foreign exchange contracts at 31 March and are as follows: Buy Group Buy Sell Sell Forward contracts to purchase GBP, sell USD 1.0 (1.0) 12.7 (13.1) Forward contracts to purchase GBP, sell EUR 7.0 (7.1) 5.6 (5.4) Forward contracts to purchase GBP, sell Other 1.9 (1.9) 4.6 (4.7) Forward contracts to purchase INR, sell GBP 33.0 (31.4) 28.8 (29.0) Forward contracts to purchase INR, sell USD 13.5 (14.5) The hedged highly probable forecast transactions denominated in foreign currency are expected to occur at various dates during the next 12 months. Gains and losses recognised in the hedging reserve in equity on forward foreign exchange contracts as at 31 March are recognised in the Consolidated Income Statement in the period or periods during which the hedged forecast transaction affects the Consolidated Income Statement. This is within 12 months of the end of the reporting period. Derivatives are classified as a current asset or liability. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months. The amounts disclosed in the table below are the contractual undiscounted cash flows of forward currency contracts at the year end: Group Inflow Outflow Net Inflow Outflow Net Current 26.7 (29.1) (2.4) 31.2 (32.1) (0.9) Later than one year and no later than two years 11.5 (12.1) (0.6) 18.9 (19.9) (1.0) Later than two years and no later than five years 14.2 (15.1) (0.9) 0.2 (0.2) Non-current 25.7 (27.2) (1.5) 19.1 (20.1) (1.0) Total 52.4 (56.3) (3.9) 50.3 (52.2) (1.9) The Group used derivative instruments to hedge foreign currency receipts and payments on current contracts, as described in note 2. All of the Group s financial instruments are classified as Level 2 under amendments to IFRS 7, Financial instruments: disclosures. A definition of Level 2 financial instruments is included in note 2. The fair value of derivative financial instruments is calculated based on quoted forward currency rates at the balance sheet date. The Group has reviewed all contracts for embedded derivatives and does not have any such instruments that are closely related to the host contract.

159 Financial Statements 157 Notes to the Financial Statements continued 24. Other receivables Group Group Company Company Non-current assets: Loan notes receivable Impairment of loan notes receivable (9.6) (9.6) During the year the Group reduced interest-bearing loan notes by 0.1m in Connect Plus (M25) Intermediate Limited (: increased by 1.8m), a company in which the Group has a 10% shareholding. Under the terms of the Connect Plus M25 finance agreement, the Group is required to lend Connect Plus (M25) Intermediate Limited 20m over a period from May 2009 to October This funding is lent on by Connect Plus (M25) Intermediate Limited to Connect Plus (M25) Limited, the main trading entity for the Connect Plus M25 project and the company which holds the 30 year PFI contract with the Highways Agency to design, build, fund and then operate and maintain the M25. One of the subcontractors used by Connect Plus (M25) Limited to deliver its main obligations under this project is Connect Plus Services. The Group s interest in Connect Plus Services is disclosed in note 41 and Connect Plus (M25) Intermediate Limited is considered a related party of the Group. At 31 March the Group held 19.9m of interest-bearing loan notes in Connect Plus (M25) Intermediate Limited (: 20.0m). These loan notes mature in 2039, and has a nominal interest rate of 12% per annum. None of the other receivables are past due. 25. Inventories Group Raw materials and consumables 0.2 Strategic Report The directors consider that the carrying amount of inventories approximates their fair value. There were no amounts of inventories written off during the year (: nil). In the prior year, inventories of 0.8m relating to the Group s UK highways services business were reclassified from inventories at 31 March and classified as an asset held for sale. 26. Trade and other receivables Group Group Company Company Note Current assets: Trade receivables Less: Provision for impairment of receivables (23.9) (24.3) Trade receivables net Amounts recoverable on contracts Amounts due from subsidiary undertakings Amounts due from joint ventures Other receivables Prepayments and accrued income The directors consider that the carrying amounts of trade and other receivables approximate their fair value. At 31 March, 156.8m (: 172.1m) of Group trade receivables were within normal payment terms and considered to be fully performing. At 31 March, 96.3m (: 100.1m) of Group trade receivables were past due and aged up to six months from invoice date and carried a provision for impairment of 0.3m (: 0.4m). The remaining Group trade receivables of 96.0m (: 99.7m) which were past due and aged up to six months from invoice date but not impaired relate to a number of independent customers for whom there is no recent history of default. Financial Statements Corporate Information Group trade receivables aged beyond six months of invoice date totalled 52.7m (: 42.7m) and carried a provision for impairment of 23.6m (: 23.9m).

160 158 Financial Statements Notes to the Financial Statements continued Movements in the Group provision for impairment of trade receivables were as follows: Group Provision for impairment at beginning of year (24.3) (24.6) Increase in provisions (11.3) (8.7) Release of provisions Receivables written off as uncollectable Difference on exchange 1.6 (0.9) Provision for impairment at end of year (23.9) (24.3) None of the financial assets that are fully performing were renegotiated during the year. The other classes within trade and other receivables do not contain impaired assets. At 31 March, 0.5m of the Company s amounts due from subsidiary undertakings were fully provided against (: 0.5m), with an in year release of provisions of nil (: 9.0m), see note 41. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security. 27. Financial assets at fair value through profit or loss In accordance with IFRS 7, disclosure is required for financial instruments that are measured in the Consolidated Balance Sheet at fair value. This requires disclosure of fair value measurements by level. The Group s financial assets that are measured and recognised at fair value through profit or loss include certificates of deposit, fixed interest securities, life insurance policies, floating rate notes and UK treasury bills. The Group s financial liabilities that are measured and recognised at fair value include derivative financial instruments. The fair value of the Group s derivative financial instruments are disclosed in note 23. The following table presents the Group s financial assets measured at fair value through profit or loss. Total Group Total Level 1 Level 2 Level 1 Level 2 Certificates of deposit Floating rate notes Fixed interest securities UK treasury bills Life insurance policies Marketable securities A definition of Level 1 and Level 2 financial instruments is included in note 2. There have been no changes to the classification of financial assets between Level 1 and Level 2 financial instruments at 31 March or. Changes in fair values of financial assets at fair value through profit or loss include fair value loss of 0.1m (: 0.3m gain). 28. Cash and cash equivalents Group Group Company Company Cash at bank and in hand Short term bank deposits The effective interest rate on cash and cash equivalents was 0.5% (: 0.7%). Included within cash at bank and in hand is 2.2m (: 0.1m) held by the Company s EBTs.

161 Financial Statements 159 Notes to the Financial Statements continued 29. Borrowings Group Group Company Company Current Bank loans Bank overdraft 2.4 Finance leases Non-current Private placement debt Finance leases Strategic Report Total The directors consider that the carrying amount of current borrowings approximates their fair value. The maturity profile of the carrying amount of the non-current borrowings was as follows: Group Repayable: Later than one year and no later than two years Later than two years and no later than five years 0.1 Later than five years The carrying amount of borrowings are denominated in the following currencies: Bank loans and private placement debt Finance leases Bank loans and private placement debt Finance leases Group Total Sterling US dollar The total present value of minimum lease payments under finance leases fall due as follows: Group No later than one year 0.1 Later than one year and no later than five years Future finance charges on finance leases Present value of finance lease payables Finance leases are on a fixed repayment basis, with interest rates fixed at the contract date. The average effective borrowing rate for all finance leases was 7.7% (: 6.2% including those classified as held for sale) over a weighted average remaining period of 26 months (: 52 months). Total Financial Statements Corporate Information

162 160 Financial Statements Notes to the Financial Statements continued Borrowing facilities The Group has the following undrawn committed borrowing facilities available at 31 March expiring as follows: Group Later than one year and no later than two years Later than two years and no later than five years All of the Group s undrawn committed borrowing facilities will be subject to floating rates of interest. On 10 October the Group entered into a new five year revolving credit facility (RCF). This facility matures in October The new arrangement provides the Group with an enlarged committed credit facility of 200m, and replaced the Group s previous 150m RCF and 30m bilateral facility. This larger facility provides the Group with increased and longer term financial capacity to support its strategy. The total letters of credit in issue under the committed facility at 31 March were 3.3m (31 March : 6.9m). The new facility includes four of the Group s existing lenders, Banc of America Securities Limited, Barclays Bank plc, HSBC Bank plc and National Westminster Bank plc, together with three new banks, The National Bank of Abu Dhabi, Abbey National Treasury Services plc and United Overseas Bank Limited. The Group s borrowing facilities include a number of undertakings and financial covenants. Compliance with these covenants is monitored. As at 31 March, and since, there have been no breaches (: none). In the prior year, the Group raised $75m through the successful execution of its debut issue in the US private placement market. The proceeds were used to repay drawn funds under the Group s existing banking facilities. The private placement is due for repayment on 31 May 2019 and carries a nominal interest rate of 4.38%. 30. Trade and other payables Group Company Note Current liabilities: Trade payables Fees invoiced in advance Amounts due to subsidiary undertakings Social security and other taxation Deferred PPP/PFI bid costs recovered and development fees 0.1 Accruals and deferred income Other payables The directors consider that the carrying values of the Group s trade and other payables approximate their fair value.

163 Financial Statements 161 Notes to the Financial Statements continued 31. Provisions for other liabilities and charges Group Vacant property Vacant property Current Later than one year and no later than two years Later than two years and no later than five years Later than five years Non-current Strategic Report Total Group Vacant property Note Balance at 1 April 5.9 Provisions charged to the income statement 1.9 Provisions released to the income statement (1.8) Provisions utilised (2.0) Unwinding of discount Balance at 31 March 4.1 The vacant property provision is discounted and is expected to be utilised over the next 12 years (: 13 years). No provision has been released or utilised for any purpose other than that for which it was established. 32. Post-employment benefit liabilities The Group s post-employment benefit liabilities are analysed below: Group Restated Net retirement benefit liabilities Other post-employment benefit liabilities As detailed in note 1, during the year the Group adopted and retrospectively applied IAS 19 (revised 2011). IAS 19 (revised 2011) and the related consequential amendments have impacted the accounting for the Group s defined benefit scheme by replacing the interest cost and expected return on plan assets with a net interest charge on the net defined benefit liability. In addition, the standard requires that unvested past service cost and administration costs be recognised immediately in the income statement, which has also had a small impact on the Group s defined benefit liability. The effect of this resulted in the net defined benefit obligation at 1 April 2012 being restated as 262.5m (previously 265.3m); and 31 March as 295.6m (previously 298.8m). Comparative information has been restated for the effect of the retrospective application of the amendment to IAS 19 as disclosed in note 44. Financial Statements Corporate Information

164 162 Financial Statements Notes to the Financial Statements continued a) Net retirement benefit liabilities The Group, through trustees, operates a number of defined benefit and defined contribution pension schemes. Defined contribution schemes are those where the Group s obligation is limited to the amount that it contributes to the scheme and the scheme members bear the investment and actuarial risks. Defined benefit schemes are schemes other than defined contribution schemes where the Group s obligation is to provide specified benefits on retirement. The two main defined benefit schemes are the Atkins Pension Plan (the Plan) and the Railways Pension Scheme, both of which are funded final salary schemes. The assets of both schemes are held in separate trustee-administered funds. Other pension schemes include the Atkins McCarthy Pension Plan in the Republic of Ireland, which is a final salary funded defined benefit scheme, and a range of defined contribution schemes or equivalent. The schemes operate under trust law and are managed and administered by trustees on behalf of the members in accordance with the terms of the trust deed and rules and relevant legislation. Defined benefit contributions are determined in consultation with the trustees, after taking actuarial advice. The trustees are responsible for establishing the investment strategy and ensuring that there are sufficient assets to meet the cost of current and future benefits. The Plan is closed to the future accrual of benefit; all defined benefit members of the Plan were transferred to a defined contribution section for future service where it was clear they did not benefit from a statutory or contractual right to a final salary pension. In 2012 Atkins Limited, an indirect wholly-owned subsidiary of the Company, undertook an enhanced transfer value (ETV) exercise for deferred members of the Plan. The exercise gave rise to a settlement gain under IAS 19 in respect of those members who transferred out their benefits. The Plan recognised a net settlement gain of 0.1m in respect of the ETV exercise for the year ended 31 March. This is to allow for the difference between the expected impact of the exercise already included in the 31 March 2012 disclosures and the actual impact of the exercise. The settlement gain of 0.1m is based on the transfer out of the Plan of a further 1.3m of assets and corresponding liabilities of 1.4m in respect of those members. The Railways Pension Scheme invests in a range of pooled investment funds intended to generate a combination of capital growth and income and as determined by the trustee, taking account of the characteristics of the obligations and the trustee s attitude to risk. The majority of the Railways Pension Scheme s assets that are intended to generate additional returns, over the rate at which the obligations are expected to grow, are invested in a single pooled growth fund. This fund is invested in a wide range of asset classes and the fund manager RPMI has the discretion to vary the asset allocation to reflect its views on the relative attractiveness of different asset classes at any time. The remaining assets in the Railways Pension Scheme are principally fixed and index-linked bonds. The Railways Pension Scheme recognised a curtailment gain in the year ended 31 March in respect of the two new benefit bases that came into effect for certain members from 1 January. The curtailment gain arose for members moving from the existing uncapped salary category or retail price index (RPI) capped salary category to the new consumer price index (CPI) capped category. The reduction in the past service liability for this curtailment was 4.3m and this was recognised as a curtailment gain in the year ended 31 March. The Atkins McCarthy Pension Plan was closed to future accrual of benefits for members who do not benefit from a statutory or contractual right to a final salary pension on 31 March These members transferred to the Personal Retirement Savings Accounts Ireland (PRSA Irish Life) scheme with effect from 1 April The defined benefit sections of all pension schemes are closed to new entrants, who are offered membership of the defined contribution section. Membership of the Group s principal pension schemes is as follows: Defined benefit schemes Defined contribution schemes Atkins Pension Plan Railways Pension Scheme Atkins Pension Plan Faithful+Gould No. No. No. No. No. No. No. No. Members ,163 7, Deferred pensioners 7,018 7, ,978 8,512 1,350 1,294 Pensioners 3,366 3, ,389 10, ,141 15,719 2,285 2,180

165 Financial Statements 163 Notes to the Financial Statements continued The main assumptions used for the IAS 19 valuation of the retirement benefit liabilities for the Atkins Pension Plan and the Railways Pension Scheme are listed in the table below: Price inflation RPI 3.50% 3.40% CPI 2.50% 2.40% Rate of increase of pensions in payment Limited Price Indexation (RPI-based) 3.20% 3.10% Limited Price Indexation (CPI-based) 2.50% 2.40% Limited Price Indexation to 2.5% 2.50% 2.50% Fixed 5.00% 5.00% Rate of increase in salaries Atkins Pension Plan 5.00% 4.90% Railways Pension Scheme (uncapped) 5.75% 5.65% Railways Pension Scheme (RPI capped) 3.50% 3.40% Railways Pension Scheme (CPI capped) 2.50% 2.40% Rate of increase for deferred pensioners Atkins Pension Plan 3.50% 3.40% Railways Pension Scheme 2.50% 2.40% Discount rate 4.50% 4.60% Longevity at age 65 for current pensioners Men 24.1 years 24.0 years Women 26.3 years 25.9 years Longevity at age 65 for future pensioners (current age 45) Men 26.3 years 26.2 years Women 28.6 years 28.2 years The actuarial tables used to calculate the retirement benefit liabilities for the Plan were the Self-Administered Pension Schemes (SAPS) tables, with medium cohort improvements from 2002 to 2009 and a scaling factor of 0.85/0.90 for males/females respectively. Future improvements are based on CMI improvements with a 1.5% per annum improvement trend, based on year of use application. The Railways Pension Scheme results have been adjusted on an approximate basis to be based on the same mortality tables. The components of the pension cost are as follows: Atkins Pension Plan Railways Pension Scheme Note Cost of sales Current service cost Administrative expenses Total charge Other Net interest expense Total charge to income statement for defined benefit schemes Charge for defined contribution schemes Total charge to income statement Statement of comprehensive income (Loss)/gain on pension scheme assets (25.9) (20.1) Changes in assumptions (34.5) (7.7) (1.2) (43.4) Remeasurements loss recognised in other comprehensive expense (60.4) (2.5) (0.6) (63.5) Deferred tax credited/(charged) to equity (0.8) Remeasurements loss (net of deferred tax) (53.3) (3.3) (0.5) (57.1) Total Corporate Information Financial Statements Strategic Report

166 164 Financial Statements Notes to the Financial Statements continued Atkins Pension Plan Railways Pension Scheme Restated Note Other Total Cost of sales Current service cost Administrative expenses Curtailment gain (4.3) (4.3) Settlement gain (net) (0.1) (0.1) Total charge/(credit) 0.1 (2.2) (2.1) Net interest expense Total charge/(credit) to income statement for defined benefit schemes 10.6 (0.1) 10.5 Charge for defined contribution schemes Total charge/(credit) to income statement 10.6 (0.1) Statement of comprehensive income Gain on pension scheme assets Changes in assumptions (123.8) (24.8) (4.9) (153.5) Remeasurements loss recognised in other comprehensive expense (26.9) (15.7) (4.5) (47.1) Deferred tax credited to equity Remeasurements loss (net of deferred tax) (21.3) (13.2) (3.9) (38.4) Atkins Pension Plan Railways Pension Scheme Other Total Defined benefit obligation (1,302.1) (245.3) (13.1) (1,560.5) Fair value of plan assets 1, ,236.3 Retirement benefit liabilities (258.6) (60.7) (4.9) (324.2) Atkins Pension Plan Railways Pension Scheme Other Total Defined benefit obligation (1,248.8) (230.2) (12.2) (1,491.2) Fair value of plan assets 1, ,209.2 Retirement benefit liabilities (220.9) (56.4) (4.7) (282.0) Other includes the Atkins McCarthy Pension Plan and an unfunded pension obligation in relation to a former director, for 1.0m (: 0.9m).

167 Financial Statements 165 Notes to the Financial Statements continued The major categories of plan assets as a percentage of total plan assets are as follows: Atkins Pension Plan Railways Pension Scheme % % Equities Government bonds Corporate bonds Property Cash Other , Atkins Pension Plan Railways Pension Scheme % % Equities Government bonds Corporate bonds Property Cash , The assets of the schemes do not include any direct holdings of the Group s financial instruments, nor any property occupied by, or other assets, of the Group. Movements in the present value of the defined benefit obligation are as follows: Atkins Pension Plan Railways Pension Scheme Other Total Defined benefit obligation at beginning of year 1, ,491.2 Service cost Administrative expenses Interest cost Remeasurements loss recognised in other comprehensive expense Employee contributions Benefit payments (38.0) (6.7) (0.3) (45.0) Difference on exchange (0.3) (0.3) Defined benefit obligation at end of year 1, ,560.5 Atkins Pension Plan Railways Pension Scheme Other Total Defined benefit obligation at beginning of year 1, ,327.0 Service cost Administrative expenses Curtailment gain (4.3) (4.3) Settlement gain (1.4) (1.4) Interest cost Remeasurements loss recognised in other comprehensive expense Employee contributions Benefit payments (47.7) (7.5) (0.2) (55.4) Difference on exchange Defined benefit obligation at end of year 1, ,491.2 Corporate Information Financial Statements Strategic Report

168 166 Financial Statements Notes to the Financial Statements continued Movements in the fair value of plan assets are as follows: Atkins Pension Plan Railways Pension Scheme Other Total Fair value of plan assets at beginning of year 1, ,209.2 Interest return on plan assets Employer contributions Employee contributions Benefits paid (38.0) (6.7) (0.3) (45.0) Remeasurements (loss)/gain recognised in other comprehensive expense (25.9) (20.1) Difference on exchange (0.2) (0.2) Fair value of plan assets at end of year 1, ,236.3 Atkins Pension Plan Railways Pension Scheme Other Total Fair value of plan assets at beginning of year ,078.7 Interest return on plan assets Settlement loss (1.3) (1.3) Employer contributions Employee contributions Benefits paid (47.7) (7.5) (0.2) (55.4) Remeasurements gain recognised in other comprehensive expense Difference on exchange Fair value of plan assets at end of year 1, ,209.2 Movements in the net retirement benefit liabilities are as follows: Atkins Pension Plan Railways Pension Scheme Other Total Net retirement benefit liabilities at beginning of year (restated) (220.9) (56.4) (4.7) (282.0) Service cost (0.1) (2.0) (2.1) Administrative expenses (0.2) (0.2) Net finance costs (9.4) (2.5) (0.1) (12.0) Contributions Remeasurements gain recognised in other comprehensive expense (60.4) (2.5) (0.6) (63.5) Difference on exchange Net retirement benefit liabilities at end of year (258.6) (60.7) (4.9) (324.2) Atkins Pension Plan Railways Pension Scheme Other Total Net retirement benefit liabilities at beginning of year (restated) (204.6) (43.2) (0.5) (248.3) Service cost (0.2) (1.9) (2.1) Administrative expenses (0.2) (0.2) Net finance costs (10.5) (2.1) (12.6) Curtailment gain Settlement gain Contributions Remeasurements loss recognised in other comprehensive expense (26.9) (15.7) (4.5) (47.1) Net retirement benefit liabilities at end of year (restated) (220.9) (56.4) (4.7) (282.0)

169 Financial Statements 167 Notes to the Financial Statements continued Cumulative remeasurement effects recognised in Other Comprehensive Income are as follows: Atkins Pension Plan Railways Pension Scheme Other Total Losses at the beginning of year (194.1) (34.2) (11.2) (239.5) Net remeasurement losses recognised in the year: (60.4) (2.5) (0.6) (63.5) Loss from change in financial assumptions (41.2) (7.2) (1.2) (49.6) Experience gains/(losses) 6.7 (0.5) 6.2 Actuarial loss on defined benefit obligation arising during the year (34.5) (7.7) (1.2) (43.4) Return on plan assets (less)/greater than discount rate (25.9) (20.1) Strategic Report Losses at the end of year (254.5) (36.7) (11.8) (303.0) Atkins Pension Plan Railways Pension Scheme Other Total Losses at the beginning of year (restated) (167.2) (18.5) (6.7) (192.4) Net remeasurement losses recognised in the year: (26.9) (15.7) (4.5) (47.1) Loss from change in financial assumptions (123.8) (22.9) (4.9) (151.6) Experience losses (1.9) (1.9) Actuarial loss on defined benefit obligation arising during the year (123.8) (24.8) (4.9) (153.5) Return on plan assets greater than discount rate Losses at the end of year (restated) (194.1) (34.2) (11.2) (239.5) The return on plan assets is as follows: Atkins Pension Plan Railways Pension Scheme Other Total Expected return on plan assets Experience (loss)/gain on plan assets (25.9) (20.1) Actual return on plan assets Atkins Pension Plan Railways Pension Scheme Other Total Expected return on plan assets Experience gain on plan assets Actual return on plan assets Financial Statements Corporate Information

170 168 Financial Statements Notes to the Financial Statements continued History of experience gains and losses: Total Restated Total 2012 Total 2011 Total 2010 Total Experience (loss)/gain on scheme assets (20.1)m 106.4m 83.8m (2.5)m 125.2m Percentage of scheme assets (1.6)% 8.8% 7.8% (0.3)% 14.2% Experience gain/(loss) on scheme liabilities 6.2m (1.9)m 4.4m 43.8m (0.3)m Percentage of defined benefit obligation (0.4)% 0.1% (0.3)% (3.4)% Defined benefit obligation (1,560.5)m (1,491.2)m (1,329.8)m (1,282.1)m (1,322.7)m Fair value of plan assets 1,236.3m 1,209.2m 1,078.7m 944.3m 882.7m Net retirement benefit liabilities (324.2)m (282.0)m (251.1)m (337.8)m (440.0)m The Group completed its last triennial valuation as at 31 March and is therefore due to complete its next triennial valuation as at 31 March The Group considers that the contribution rates set at the recent valuation date are sufficient to eliminate the deficit over the agreed period. The nature of the funding regime in the UK creates uncertainty around the size and timing of cash that the Company will be required to pay to the pension schemes. The Group has agreed that it will proceed with a new repayment plan that ends in March 2025, with one-off payments of 32m for each of the two years ending 31 March 2015, which escalate thereafter at 2.5% per annum. The Group expects employer contributions to be paid during the financial year to 31 March 2015 to be around 34.9m, of which 32m is in relation to the funding of the actuarial deficit, and employee contributions paid to be around 1.5m. Expected benefit payments made directly by the Group to pensioners in the financial year to 31 March 2015 are nil. The approximate effect on the liabilities from changes in the main assumptions used to value the liabilities are as follows: Change in assumption Effect on plan liabilities Atkins Pension Plan Railways Pension Scheme Discount rate increase/decrease 0.5% decrease/increase 10.0% decrease/increase 8.0% Inflation increase/decrease 0.5% increase/decrease 5.0% increase/decrease 8.0% Real rate of increase in salaries increase/decrease 0.5% increase/decrease 2.0% increase/decrease 1.0% Longevity increase 1 year increase 3.0% increase 2.0% The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the Consolidated Balance Sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period. The effect of the change in inflation on liabilities assumes a corresponding change in salary increases and inflation-related pension increases. b) Other post-employment benefit liabilities The Group operates unfunded schemes within certain of its non-uk businesses, including gratuity schemes, Key Employee Supplemental Option Plans (KESOP) and post-retirement medical benefit schemes. Members of the gratuity schemes are entitled to receive a cash gratuity on leaving the business which is dependent on their length of employment and final salary. Valuation of the gratuity obligation is carried out in line with the principles of IAS 19, Employee benefits. The Group operates a KESOP providing some key officers and employees in its North American business (the business) with post-retirement benefits, known as the Supplemental Income Program (SIP). The SIP is an unfunded plan that provides participants with retirement income for a specified period of between 5 and 15 years upon retirement, death or disability. The plan fixes a minimum level for retirement benefits to be paid to participants based on the participant s position in the business, their age and length of service at retirement. Additionally, certain executive agreements have been amended to provide post-retirement medical benefits to those employees and their spouses, at a level substantially similar to those medical and hospitalisation benefits paid and provided to senior executives currently employed by the business. The insurance benefits will be provided without any further or additional services from the employee to the business and they will be paid for and provided for as long as the employee and their spouse shall live.

171 Financial Statements 169 Notes to the Financial Statements continued Group Note Other post-employment obligations at beginning of year Acquisition of subsidiary undertakings Current service cost and other comprehensive income Past service cost and other comprehensive income 1.5 Interest cost Net measurement loss recognised in the year Benefit payments (3.8) (4.2) Difference on exchange (1.4) 0.7 Other post-employment obligations at end of year The main assumptions used for the IAS 19 valuation of other post-employment benefits are listed in the table below: Gratuity scheme Discount rate 5.00% 5.00% Salary inflation 3.00% 3.00% Average remaining service period 2 years 2 years KESOP scheme Discount rate 1.05% 1.05% Medical plan Discount rate 4.00% 3.75% Healthcare cost trend rate for next year 7.50% 7.50% Rate of decline of cost trend rate 5.00% 5.00% Year that rate reaches ultimate trend rate Strategic Report c) Post-employment benefit liabilities Risks Through its defined benefit pension plans and other post-employment benefit liabilities, the Group is exposed to a number of investment and actuarial risks, the most significant of which are detailed below: Asset volatility The Retirement benefit plan liabilities are calculated using a discount rate set with reference to corporate bond yields. If plan assets underperform this yield, this will create a deficit. Both the UK and Irish plans hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while exposing the Group to greater volatility and valuation risk in the short-term. The government bonds represent investments in UK Government securities only. Life expectancy The majority of the plans obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans liabilities. This is particularly significant in the UK and Irish plans, where inflationary increases result in higher sensitivity to changes in life expectancy. The Atkins Pension Plan has had interest and inflation rate hedging in place for some time, but due to the relative immaturity of the longevity hedging market, to date the Group has held off implementing a longevity hedging programme. As a consequence, the Plan remains fully exposed to any future improvements in mortality beyond those already assumed by the Actuary. Changes in bond yields A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans bond holdings. Financial Statements Corporate Information

172 170 Financial Statements Notes to the Financial Statements continued Inflation risk Some of the Group pension obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation). The majority of the plans assets are either unaffected by fixed interest bonds or loosely correlated with equities inflation, meaning that an increase in inflation will also increase the deficit. The Group does not use derivatives or hedging, other than interest and inflation rate hedging, to manage its risk. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A large portion of assets in consists of equities and bonds, although the Group also invests in property, cash and investment (hedge) funds. The Group believes that equities offer the best returns over the long term with an acceptable level of risk. The majority of equities are in a globally diversified portfolio of international blue chip entities. A breakdown of the major categories of plan assets as a percentage of total plan assets for the two UK schemes is detailed above. Expected maturity analysis of other post-employment benefit liabilities are as follows: At 31 March Less than a year Between 1-2 years Between 2-5 years Over 5 years Total KESOP ($m) Post-retirement medical benefit schemes ($m) An approximate analysis of the maturity of the obligations for the two main defined benefit schemes is given in the table below: Atkins Pension Plan Railways Pension Scheme % % % % Proportion relating to active members Proportion relating to deferred members Proportion relating to pensioners Total The weighted average duration of the defined benefit obligation is 20 years (: 20 years) for the Atkins Pension Plan, 16 years (: 16 years) for the Railways Pension Scheme and between 25 and 30 years (: between 25 and 30 years) for the McCarthy Pension Plan. Expected future benefit payments from the Atkins Pension Plan (the Plan) are mostly in respect of pension payments that are either linked to price inflation or receive fixed pension increases. These projected benefit payments are expected to be made from the Plan over the next 80 or so years. The payments are expected to rise over the next 30 years, when they will peak, before beginning to decline. The Group expects pension benefits to be paid by the schemes during the financial year to 31 March 2015 to be approximately 46.7m. 33. Other non-current liabilities Group Deferred PPP/PFI bid costs recovered, maturing: Later than one year and no later than two years Later than two years and no later than five years Later than five years

173 Financial Statements 171 Notes to the Financial Statements continued 34. Ordinary shares Group and Company No. shares No. shares Issued, allotted and fully paid ordinary shares of 0.5p each At 1 April and at 31 March 104,451, ,451, At the annual general meeting (AGM), shareholder authority was obtained for the Company to purchase up to a maximum of 10,011,000 of its own ordinary shares (representing approximately 10% of the issued share capital of the Company on 12 June ) for a period ending on the earlier of the next AGM or 31 October, provided that certain conditions (relating to the purchase price) are met. The notice of meeting for the AGM to be held at 1100 hours on Wednesday 30 July proposes that shareholders approve a resolution updating and renewing this authority. Shares in the Company may also be purchased by Atkins EBTs. As at the date of this report there were 4,341,000 ordinary shares of 0.5 pence each (nominal value 21,705) held as treasury shares. No shares were purchased during the year ended 31 March (: nil). The 4,341,000 treasury shares, which represent approximately 4.2% (: 4.2%) of the total of the called up share capital as at the date of this report, have not been cancelled and represent a deduction from shareholders equity. 35. Share-based payments Long Term Incentive Plans WS Atkins plc Long Term Growth Unit plan (LGU) August 2012 onwards A share plan for senior executives where units are granted at a base price which is normally based on the six-month average share price calculated at the date of grant. The vesting of units occurs in three equal tranches on the fourth, fifth and sixth anniversaries of the date of grant. Vesting is subject to a strategic underpin which is considered by the Remuneration Committee. On exercise, the value of each unit is equal to the increase, if any, in the average share price of one notional Company share between the grant date and the exercise date. Any such increase will normally be calculated using the six-month average share price. No more than 50% of a participant s total number of units subject to a single grant may be exercised in any 12-month rolling period. The increase will usually be delivered in the form of a nil cost option except in the US, where awards are granted as market value options and are scaled back on exercise to allow only the exercise of options equivalent to the gain that would have been made under a non-us award. The units will generally be settled in equity. Strategic Report As a general rule, awards granted to participants who leave employment prior to vesting will be forfeited. In the event a participant leaves as a result of a qualifying reason, they receive a pro rata entitlement. WS Atkins plc Long Term Incentive Plan (LTIP) August 2012 onwards A share plan for senior executives used to grant awards that are settled in equity or, in limited circumstances, in cash. Subject to the Company s real growth in absolute EPS over the performance period. The growth target requires the increase to be more than 12% per annum in the three-year performance period to allow full vesting. If the increase is less than 5% per annum, there will be no vesting. If the increase is 5% per annum, vesting will be at 25%, and a sliding scale operates between 5% and 12% per annum. As a general rule, awards granted to participants who leave employment prior to vesting will be forfeited. In the event a participant leaves as a result of a qualifying reason, they receive a pro rata entitlement. Financial Statements Subject to vesting, participants are entitled to receive the benefit of dividends declared following grant, without interest. Atkins Long Term Incentive Plan (LTIP) September 2006 to July 2012 A share plan for senior executives and key employees used to grant awards to employees that are settled in equity or, in limited circumstances, in cash. There are different performance targets for different categories of management. Grants made to executive directors and senior employees have 50% of the grant subject to the Company s total shareholder return (TSR) performance relative to the constituents of the FTSE 250 Index (excluding investment trusts) at the start of the performance period. Full vesting of this portion of the grant will take place if the Company is ranked in the upper quartile and 30% vesting will be achieved with a median ranking, with pro rata vesting for intermediate performance. No vesting will occur for a ranking below median. The remaining 50% of the grant made to executive directors and senior employees is subject to the Company s real growth in underlying EPS over the performance period. For the 2006 and subsequent grants, the growth target requires the increase to be more than 10% per annum above the UK RPI in the three-year performance period to allow full vesting. If the increase is less than 4% per annum above the UK RPI, then there will be no vesting. If the increase is 4% per annum above the UK RPI, vesting will be at 30%, and a sliding scale operates between 4% and 10% above the UK RPI. Corporate Information Awards granted to other participants are subject solely to the EPS condition. As a general rule, awards granted to participants who leave employment prior to vesting will be forfeited. In the event a participant leaves as a result of a qualifying reason, they receive a pro rata entitlement. Subject to vesting, participants are entitled to receive the benefit of dividends declared following grant without interest.

174 172 Financial Statements Notes to the Financial Statements continued Atkins Long Term Incentive Plan (LTIP) September 2003 to August 2006 A share plan for senior executives and key employees used to grant awards to employees that are settled in equity or, in limited circumstances, in cash. The performance condition was TSR with an EPS growth underpin measured over three financial years starting with the financial year beginning immediately after the award was granted. Full vesting of any award took place for a TSR performance where the Company ranked in the top 20% in a group of up to 16 comparator companies, 30% vesting for median ranking and no vesting if TSR fell below the median. The EPS underpin was the UK RPI plus 2% per annum. As a general rule, awards granted to participants who left employment prior to vesting were forfeited. In the event a participant left as a result of a qualifying reason, they received a pro rata entitlement. All awards have now vested. Deferred Share Plans Atkins Deferred Bonus Plan (DBP) A share plan for senior executives and key employees used to grant awards to employees that are settled in equity or, in limited circumstances, in cash. There is no performance condition but awards are restricted for at least three years from the date of grant. As a general rule, awards granted to participants who leave employment prior to vesting will be forfeited. In the event a participant leaves as a result of a qualifying reason, they will receive their award in full. Subject to vesting, participants are entitled to receive the benefit of dividends declared following grant without interest. All awards have now vested. Atkins Deferred Share Plan (DSP) A share plan for senior executives and key employees used to grant awards to employees that are settled in equity or in cash. There is no performance condition but awards are restricted for a set period from the date of grant, fixed by the Remuneration Committee at grant. As a general rule, awards granted to participants who leave employment prior to vesting will be forfeited. In the event a participant leaves as a result of a qualifying reason, they will receive their award in full. Subject to vesting, participants are entitled to receive the benefit of dividends declared following grant without interest. Awards granted to executive directors in relation to the executive bonus scheme are restricted for three years from the date of grant. The Group s share-based payments charge for the year of 10.2m (: 7.5m) has been included in administrative expenses in the Consolidated Income Statement. The effect of the share-based payment transactions on the Group s results and financial position is as follows: Group Total expense recognised for equity settled share-based payment transactions Total expense recognised for cash settled share-based payment transactions Closing balance of liability for cash settled share-based payment transactions As at 31 March the following awards were outstanding: LTIPs LGU DBP/DSP No. Weighted average exercise/ transfer price No. Weighted average exercise/ transfer price No. Weighted average exercise/ transfer price Awards outstanding at 1 April ,567 2,986,816 Granted 284, , p 1,215,077 Exercised/transferred (61,226) (753,101) Lapsed (250,221) (4,000) Forfeited (112,390) Awards outstanding at 1 April 718, , p 3,332,402 Granted 192, , p 1,222,668 Exercised/transferred (52,614) (1,107,703) Lapsed (187,911) (3,270) Forfeited (33,901) (11,479) (155,112) Awards outstanding at 31 March 636, , p 3,288,985 The weighted average exercise price of LGU awards is calculated by reference to both non-us awards, where the increase in value is delivered in the form of a nil cost option, and US awards, where the awards take the form of market value options. The weighted average share price at the date of exercise was 1, pence (: pence).

175 Financial Statements 173 Notes to the Financial Statements continued A summary of awards outstanding as at 31 March is as follows: Weighted average remaining contractual life Awards outstanding at 31 March Awards exercisable at 31 March Scheme Award date Exercise price Scheme maturity Maximum term LGUs LGU (August /08/2012 onwards non-us) to 26/06/ 0.0p 4 to 6 years 10 years 8.77 years 246,783 LGU (August /08/ p onwards US) to 26/06/ to 973.5p 4 to 6 years 10 years 8.75 years 114,386 LTIPs LTIP (August 2012 onwards) LTIP (September 2006 to July 2012 TSR/EPS) LTIP (September 2006 to July 2012 EPS) LTIP (September 2003 to August 2006) DSPs DBP DSP 13/08/2012 to 24/06/ 0.0p 3 years 3 to 10 years 7.62 years 442,826 03/08/2007 to 20/06/ p 3 years 3 to 10 years 7.19 years 158,057 1,600 11/09/2006 to 30/11/ p 3 years 3 to 10 years 3.03 years 33,588 33,588 17/09/2003 to 25/06/ p 3 to 4 years 10 years 0.24 years 1,950 1,950 25/06/2004 to 30/11/ p 3 years 10 years 2.24 years 37,670 37,670 29/06/2007 to 19/11/ p 1 to 3 years 1 to 10 years 7.12 years 3,251, ,124 Strategic Report On 24 June the Company issued awards over 1,097,236 shares to employees under the DSP, 192,512 shares to employees under LTIP and 162,880 units to employees under the LGU. On 21 November the Company issued awards over 109,251 shares to employees under the DSP. On 5 December the Company issued awards over 16,181 shares to employees under the DSP. At 31 March the Company s EBTs held a beneficial interest in 2,524,663 shares (: 2,831,737 shares) at a nominal value of 0.0m (: 0.0m) and market value of 35.1m (: 25.8m). The weighted average fair value of awards granted during the year was pence (: pence). The total fair value of awards granted during the year was 14.8m (: 10.3m). Fair value of awards with market performance conditions WS Atkins plc Long Term Growth Unit plan August 2012 onwards The Black Scholes Model was used for the purposes of valuing LGU awards granted in the current year. The model calculated the fair value of awards granted, upon which the share-based payments charge is based. The assumptions used in the model are as follows: LGU Exercise price (six-month average) at grant date p p p Risk-free interest rate 1.143% 1.626% 1.718% Volatility of share price 34.0% 34.0% 34.0% Share price at grant p p p Base value (six-month average) share price at grant date p p p Expected term (from grant date) 4 years 5 years 6 years Financial Statements Corporate Information

176 174 Financial Statements Notes to the Financial Statements continued LGU Exercise price (six-month average) at grant date p p p Risk-free interest rate 0.330% 0.537% 0.711% Volatility of share price 35.0% 35.0% 35.0% Share price at grant p p p Base value (six-month average) share price at grant date p p p Expected term (from grant date) 4 years 5 years 6 years 36. Cash generated from continuing operations Note Group Group Restated Company Company Profit for the year Adjustments for: Income tax Finance income 7 (4.2) (3.4) (2.6) (2.2) Finance costs Income from other investments (1.2) Share of post-tax profit from joint ventures 4 (2.4) (3.8) Other non-cash (income)/costs (3.5) 4.5 Depreciation charges Net profit on disposal of businesses/non-controlling interests 9 (10.5) (4.5) (0.5) Profit on disposal of loan notes (0.6) Amortisation and impairment of intangible assets Release of deferred income 30 (3.1) Share-based payment charge Pensions settlement and curtailment gain 32 (4.4) Loss on disposal of property, plant and equipment 0.4 Loss on disposal of intangible assets 0.1 Gain on disposal of available-for-sale financial assets 22 (0.8) Dividends received (45.4) (16.1) Movement in provisions 31 (1.8) (4.7) Movement in inventories Movement in trade and other receivables (5.2) (5.7) Movement in payables 30 (29.9) (31.5) Movement in non-current payables (0.7) 0.3 Pension deficit funding 32 (32.0) (21.0) Cash generated from continuing operations As detailed in note 1, during the year the Group adopted and retrospectively applied IAS 19 (revised 2011). The Consolidated Income Statement for the year ended 31 March and, consequently, the analysis of cash generated from continuing operations shown above has been restated accordingly. See note 44 for further details regarding the impact of the adoption of IAS 19 (revised 2011) on the Group.

177 Financial Statements 175 Notes to the Financial Statements continued 37. Analysis of net funds 1 April Cash flow Other noncash changes Exchange movement At 31 March Cash and cash equivalents (7.0) Loan notes receivable 20.0 (0.1) Financial assets at fair value through profit or loss 35.9 (4.2) (0.2) 31.5 Borrowings due no later than one year (59.8) 4.6 (55.2) Borrowings due later than one year (49.3) 3.8 (45.5) Finance leases (5.3) (0.1) Net funds Strategic Report Included within loan notes receivable is 0.4m relating to amounts receivable within less than 12 months from a joint venture entity. 38. Contingent liabilities The Group has given indemnities in respect of performance and contractual related bonds, as well as letters of credit issued on its behalf. The amount outstanding at 31 March includes 3.3m letters of credit issued as a result of the acquisition of PBSJ. During the year ended 31 March 2011, the Group acquired PBSJ. Prior to the acquisition, the Audit Committee of the Board of directors of PBSJ undertook an internal investigation to determine whether any laws, including the Foreign Corrupt Practices Act (FCPA), had been violated in connection with certain projects undertaken by PBS&J International, Inc. (one of PBSJ s subsidiary undertakings). The investigation suggested that FCPA violations may have occurred but did not extend beyond the international operation and that none of PBSJ s executive management were involved in criminal conduct. PBSJ voluntarily disclosed this matter to the Department of Justice and to the Securities and Exchange Commission and is cooperating fully with their review. The FCPA provides for penalties, criminal and civil sanctions and other remedies. Neither at the date of acquisition nor at subsequent year ends has management been able to estimate the potential penalties that may be imposed and therefore no provision has been made. It is not considered possible to determine an accurate estimate of the fines and penalties that may be imposed as they are not formula driven or in any way the result of a predefined calculation. The Group does not have an estimate of when this will be resolved but it is considered possible to be within the next financial year. Group companies are from time to time involved in claims and litigation. The Group carries Professional Indemnity insurance cover for such claims. 39. Operating lease arrangements The Group leases various offices under operating lease arrangements. The leases have various terms, escalation clauses and renewal rights. The Group also leases vehicles, plant and equipment under operating lease arrangements. At the end of the reporting period, the future aggregate minimum lease payments under non-cancellable operating leases are payable as follows: Group Property Vehicles, plant and equipment Property Vehicles, plant and equipment No later than one year Later than one year and no later than five years Later than five years In the prior year, vehicles, plant and equipment included future aggregate minimum lease payments under non-cancellable operating leases of 0.3m and 0.1m expiring no later than one year and later than one year but no later than five years respectively, relating to the Group s UK highways services business. This business was disclosed as an asset held for sale at 31 March. Financial Statements Corporate Information

178 176 Financial Statements Notes to the Financial Statements continued At the end of the reporting period, the future minimum lease payments under non-cancellable operating leases are receivable as follows: Property Property Group No later than one year Later than one year and no later than five years Later than five years The Company had no operating lease receivables as at 31 March (: none). 40. Capital and other financial commitments Group Capital expenditure contracted for but not incurred property, plant and equipment Related party transactions Details of the directors shareholdings, share options and remuneration are given in the Remuneration Report (page 81), which forms part of these Financial Statements. Transactions with the retirement benefit schemes are shown in note 32. Details of the Company s principal subsidiaries are shown in note 42 and its principal joint ventures in note 43. Provision of goods and services to and purchases of goods and services from related parties were made at the rates charged to external customers. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provision has been made for doubtful debts in respect of amounts owed by related parties and nil charged to income and expense (: nil). a) Group sales and purchases of goods and services Group Sales of goods and services to joint ventures Purchases of goods and services from joint ventures b) Group year end balances arising from sales/purchases of goods and services to/from joint ventures and loans provided to joint ventures Group Note Receivables from joint ventures Receivables from joint ventures are shown net of contract-related provisions of nil (: nil). Payables to joint ventures c) Group year end balances arising from loans provided to other related parties Group Note Receivables from related parties d) Company sales/purchases of goods and services to/from subsidiaries The Company did not sell any goods or services to subsidiaries during the year (: nil). The Company did not purchase any goods or services from its subsidiaries during the year (: nil).

179 Financial Statements 177 Notes to the Financial Statements continued e) Company year end balances with subsidiaries Company Note Receivables from subsidiaries Payables to subsidiaries Receivables from subsidiaries are shown net of impairment of 0.5m (: 0.5m). f) Key management compensation Key management comprises the executive and non-executive directors, and certain senior managers who are members of the senior leadership team. Group Short term employee benefits Post-employment benefits Share-based payments The deferred share award element of any bonus paid to key management is not included in the salaries and other short term employment benefits number as it is included in the share-based payment charge in subsequent years. 42. Subsidiary undertakings The following companies were the principal subsidiary undertakings as at 31 March : Country of registration/ incorporation Class and percentage of shares held Name Nature of business Atkins Australasia Pty Ltd 1 Australia 100% ordinary Consulting engineers Atkins Beta Limited England and Wales 100% ordinary Investment holding company Atkins China Limited Hong Kong 100% ordinary Consulting engineers Atkins Consultants (Shenzen) Co Ltd 1 China 100% ordinary Consulting engineers Atkins Danmark A/S 1 Denmark 100% ordinary Consulting engineers Atkins Gamma Limited England and Wales 100% ordinary Investment holding company Atkins Investments UK Limited England and Wales 100% ordinary Investment holding company Atkins Limited 1 England and Wales 100% ordinary Consulting engineers Atkins North America, Inc 1 USA 100% ordinary Consulting engineers Faithful+Gould, Inc 1 USA 100% ordinary Project and programme management consultants Faithful+Gould Limited 1 England and Wales 100% ordinary Quantity surveyors and cost estimators PRBC, Inc. 1 USA 100% ordinary Construction management services The Atkins North America Holdings Corporation 1 USA 100% ordinary Investment holding company WS Atkins & Partners Overseas 1 Gibraltar 100% ordinary Consulting engineers WS Atkins (India) Private Limited 1 India 100% ordinary Consulting engineers WS Atkins, Inc 1 USA 100% ordinary Consulting engineers WS Atkins Insurance (Guernsey) Limited 1 Guernsey 100% ordinary Insurance WS Atkins International Limited 1 England and Wales 100% ordinary Consulting engineers 1. Owned by a subsidiary undertaking other than WS Atkins plc. The percentage of the issued share capital held by the Group is equivalent to the percentage of voting rights held. The Group holds the whole of all classes of issued share capital. Corporate Information Financial Statements Strategic Report All the above operate in the country of registration, except for WS Atkins & Partners Overseas, which operates in the Middle East. A full list of subsidiary companies will be filed at Companies House with the Company s Annual Return.

180 178 Financial Statements Notes to the Financial Statements continued 43. Joint ventures The following represents the principal joint ventures in which the Group participated during the year: Name Connect Plus Services (unincorporated) 1 Engage SNC 1 Nuclear Atkins Assystem Alliance SNC 1 Proportion of shares/ Nature of business interest held 2 Joint venture undertaking operation and maintenance work on the M25, London s orbital motorway. A French general partnership providing architect engineering services for the ITER programme, a nuclear fusion reactor in France. A French general partnership providing consultancy and engineering services to the international nuclear new-build market, operating internationally from offices in France. Date of last audited financial statements External auditors 32.5% N/A N/A 25.0% 31 Dec KPMG S.A. 50.0% 31 Dec KPMG S.A. 1. Owned by a subsidiary undertaking other than WS Atkins plc. 2. Proportion of shares held (where incorporated) is in respect of ordinary share capital. There are no special rights or constraints on the shares. There are no restrictions on distributions from any of these joint ventures. 44. Prior period amounts During the year the Group adopted IAS 19 (revised 2011) which increased net finance costs in the Consolidated Income Statement with a corresponding restatement of the actuarial movements in the Consolidated Statement of Comprehensive Income. In addition, unvested past service cost and administration costs have been recognised immediately in the Consolidated Income Statement, which has also had a small impact on the Group s defined benefit liabilities. The Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Statement of Changes in Equity and notes for the year ended 31 March have been restated accordingly. The effects on the Consolidated Income Statement and Consolidated Statement of Comprehensive Income are as follows: Consolidated Income Statement As previously reported Year to 31 March Effect of IAS 19 revised 31 March As restated Year to 31 March Operating profit (0.1) Profit before interest and tax (0.1) Net finance costs (9.1) (5.2) (14.3) Profit before tax (5.3) 98.0 Income tax expense (14.9) 1.2 (13.7) Profit for the year 88.4 (4.1) 84.3 Earnings per share Basic earnings per share 91.0p (4.2)p 86.8p Diluted earnings per share 88.8p (4.1)p 84.7p Statement of Comprehensive Income Profit for the year 88.4 (4.1) 84.3 Items that will not be reclassified to profit or loss Remeasurements of net post-employment benefit liabilities (52.8) 5.7 (47.1) Income tax on items that will not be reclassified to profit or loss 9.9 (1.2) 8.7 Total items that will not be reclassified to profit or loss (42.9) 4.5 (38.4) Total items that may be reclassified subsequently to profit or loss Other comprehensive (expense)/income for the year, net of tax (34.1) 4.5 (29.6) Total comprehensive income for the year

181 Five-year Summary Consolidated Income Statements for years ended 31 March Financial Statements 179 Restated Gross revenue (Group and share of joint ventures) 1, , , , ,418.0 Revenue 1, , , , ,387.9 Cost of sales (1,065.0) (1,088.6) (1,097.1) (975.2) (854.6) Gross profit Administrative expenses (571.4) (512.6) (476.8) (482.1) (420.3) Operating profit Profit on disposal of businesses, non-controlling interests and joint ventures Income from other investments 1.2 Share of post-tax profit/(loss) from joint ventures (1.9) (1.9) Profit before interest and tax Finance income Finance costs (17.8) (17.7) (14.9) (18.0) (18.4) Net finance costs (13.6) (14.3) (10.8) (14.1) (14.6) Profit before tax Strategic Report Income tax expense (17.9) (13.7) (28.7) (18.4) (19.3) Profit for the year from continuing operations Profit for the year from discontinued operations 25.0 Profit for the year Profit/(loss) attributable to: Owners of the parent Non-controlling interests 0.3 (0.3) Basic earnings per share continuing operations 98.4 p 86.8 p p 74.3 p 79.5 p discontinued operations 25.7 p 98.4 p 86.8 p p 74.3 p p Diluted earnings per share continuing operations 95.8 p 84.7 p p 72.7 p 77.9 p discontinued operations 25.2 p 95.8 p 84.7 p p 72.7 p p 1. The figures have been restated for the amendments to IAS 19, Employee Benefits. None of the years prior to 2012 have been restated. Financial Statements Corporate Information

182 180 Financial Statements Five-year Summary continued Consolidated Balance Sheets as at 31 March Restated 1 Assets Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in joint ventures Deferred income tax assets Derivative financial instruments Other receivables Current assets Inventories Trade and other receivables Financial assets at fair value through profit or loss Available-for-sale financial assets 6.1 Cash and cash equivalents Derivative financial instruments Assets of disposal group classified as held for sale Liabilities Current liabilities Borrowings (55.3) (59.8) (105.7) (48.4) (4.4) Trade and other payables (453.1) (486.7) (506.1) (521.4) (434.3) Derivative financial instruments (2.7) (1.4) (1.7) (0.5) (1.0) Current income tax liabilities (31.6) (40.5) (34.3) (36.2) (34.6) Provisions for other liabilities and charges (0.8) (1.5) (3.6) (6.4) (5.6) (543.5) (589.9) (651.4) (612.9) (479.9) Liabilities of disposal group classified as held for sale (5.2) (0.1) (543.5) (595.1) (651.5) (612.9) (479.9) Net current assets/(liabilities) (22.1) Non-current liabilities Borrowings (45.5) (49.4) (4.9) (4.6) (7.0) Provisions for other liabilities and charges (3.3) (4.4) (6.8) (12.7) (17.0) Post-employment benefit liabilities (339.0) (295.6) (265.3) (350.3) (450.5) Derivative financial instruments (1.7) (1.3) (2.5) (0.6) (0.3) Deferred income tax liabilities (15.5) (20.1) (18.8) (20.3) (1.6) Other non-current liabilities (1.5) (1.5) (1.6) (5.3) (5.8) (406.5) (372.3) (299.9) (393.8) (482.2) Net assets/(liabilities) (84.9) Capital and reserves Ordinary shares Share premium account Merger reserve Retained earnings/(accumulated losses) (55.5) (156.7) Equity attributable to owners of the parent (84.9) Non-controlling interests 0.2 (0.2) 0.1 Total equity (84.9) 1. The figures have been restated for the amendments to IAS 19, Employee Benefits. None of the years prior to 2012 have been restated

183 Financial Statements 181 Five-year Summary continued Consolidated Cash Flow Statements for the years ended 31 March Restated 1 Cash generated from operations Profit for the year Adjustments for: Income tax Finance income (4.2) (3.4) (4.1) (3.9) (3.8) Finance costs Income from other investments (1.2) Share of post-tax (profit)/loss from joint ventures (2.4) (3.8) (1.9) Other non-cash (income)/costs (3.5) 4.5 (2.9) Depreciation charges Profit on disposal of businesses, non-controlling interests and joint ventures (10.5) (4.5) (7.2) (0.1) Amortisation and impairment of intangible assets Release of deferred income (3.1) (0.2) (0.3) (0.2) Share-based payment charge Pensions settlement and curtailment gain (4.4) (33.3) (6.7) Loss on disposal of property, plant and equipment Loss on disposal of intangible assets 0.1 Gain on disposal of available-for-sale financial assets (0.8) Movement in provisions (1.8) (4.7) (5.7) (3.8) (5.9) Movement in working capital (10.3) (26.7) (34.0) (37.7) 31.5 Pension deficit funding (32.0) (21.0) (26.0) (31.9) (36.3) Cash generated from operations Cash flows from operating activities Cash generated from operating activities Interest received Interest paid (5.6) (3.2) (2.5) (2.4) (1.1) Income tax paid (10.9) (7.1) (11.0) (12.3) (18.0) Net cash generated from operating activities Cash flows from investing activities 0.4 (5.4) (35.9) (196.5) (21.1) Strategic Report Financial Statements Cash flows (used in)/generated from financing activities (40.2) (38.8) (40.5) Net increase/(decrease) in cash, cash equivalents and bank overdrafts (132.3) 49.2 Cash, cash equivalents and bank overdrafts at beginning of year Exchange movements (7.0) 3.5 (0.1) (6.5) 1.4 Cash, cash equivalents and bank overdrafts at end of year Financial assets at fair value through profit or loss Loan notes receivable Available-for-sale financial assets 6.1 Borrowings due no later than one year (55.2) (59.8) (104.0) (46.3) (0.7) Borrowings due later than one year (45.5) (49.3) Finance leases (0.1) (5.3) (6.6) (6.7) (10.7) Net funds The figures have been restated for the amendments to IAS 19, Employee Benefits. None of the years prior to 2012 have been restated. Corporate Information

184 182 Corporate Information Investor Information WS Atkins plc Registered in England Company no Company secretary and registered office Richard Webster WS Atkins plc Woodcote Grove Ashley Road Epsom Surrey KT18 5BW England Financial calendar Ex-dividend date 9 July Record date 11 July Last day to elect for DRIP 23 July Annual General Meeting 30 July Final dividend payment date 22 August Shareholder services Registrar Enquiries and notifications concerning dividends, share certificates, transfers and address changes should be sent to the registrar, whose address is: Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4ZF UK Telephone: if calling from the UK (calls cost 10p per minute plus any additional network charges) or +44 (0) if calling from outside the UK; lines are open 0900 to 1730 Monday to Friday. Share portal: Other shareholder enquiries should be addressed to Atkins company secretary at the registered office. American Depositary Receipts (ADRs) The Company has a Level 1 ADR programme. This enables US investors to purchase the Company s American Depositary Shares (ADSs). Each ADS represents 1 ordinary share. JPMorgan Chase Bank N.A. acts as an ADR depositary bank. For the issuance and management of ADRs, and any general ADR questions, please contact: JPMorgan Chase Bank N.A. P.O. Box St. Paul Minnesota USA Investor helpline: if calling from the US (toll free) or if calling from outside the US Website: Investor relations website Many commonly asked shareholders questions are addressed in the investor relations section of our website: E-communications Shareholders can choose to receive all Company communications electronically. This environmentally friendly way of receiving information has a number of advantages including speedier delivery of documents and the ability to access reports and results on the internet wherever you are. To register please visit our share portal at International payment service for dividends Capita Registrars offers shareholders a service to convert sterling dividends into certain local currencies. This service provides faster access to funds and will generally cost less than the fees charged by your local bank. For further information, please contact the registrar (address above). Telephone: +44 (0) if calling from outside the UK or if calling from the UK (calls cost 10p per minute plus any additional network charges); lines are open 0900 to 1730 Monday to Friday. [email protected] or visit the registrar s website: capitaregistrars.com. Dividend reinvestment plan (DRIP) The Company offers a dividend reinvestment plan to shareholders as a cost-efficient way of increasing their shareholding in the Company. Should you wish to participate in the DRIP please contact the registrar on the telephone number given above to request a mandate form and an explanatory booklet. Your completed mandate form must be received by the registrar no later than 23 July if you wish your final dividend for the year to be reinvested to buy additional shares. Amalgamation of accounts Shareholders who receive duplicate sets of Company mailings owing to multiple accounts in their name should contact the registrar to have their accounts amalgamated. Unsolicited mail The Company is obliged by law to make its share register available to third parties who may then use it for a mailing list. If you are a UK shareholder and you wish to limit receipt of unsolicited mail you may do so by registering with the Mailing Preference Service (MPS). Registration can be made online at or via telephone on

185 Corporate Information 183 Investor Information continued Giving your shares to charity If you only have a small number of shares whose value makes it uneconomic to sell them, you may wish to consider donating them to charity though ShareGift, an independent share donation scheme. The relevant share transfer form can be obtained from the registrar. ShareGift is administered by The Orr Mackintosh Foundation Limited, registered charity number Further information may be obtained on +44 (0) or from Identity theft Identity theft is on the increase. Criminals may steal your personal information, putting your Atkins shareholding at risk. Tips for protecting your Atkins shares: ensure all your certificates are kept in a safe place or hold your shares electronically in CREST via a nominee keep all correspondence from the registrar that shows your shareholder reference number in a safe place, or destroy your correspondence by shredding it if you change address inform the registrar in writing or via our share portal at know when dividends are paid and consider having your dividend paid directly into your bank account. This will reduce the risk of the cheque being intercepted or lost in the post. If you change your bank account, inform the registrar of the details of your new account. You can do this by post or online using our share portal at Respond to any letters the registrar sends you about this if you receive a letter from the registrar regarding a change of address or a dividend instruction but have not recently moved or requested a change to how you receive your dividends please contact them immediately as you may have been a victim of identity theft if you are buying or selling shares only deal with brokers registered in your country of residence or the UK. Warning to shareholders Share fraud includes scams where investors are called out of the blue and offered shares that often turn out to be worthless or non-existent, or an inflated price for shares that they own. These calls often require you to make a quick decision and come from fraudsters operating in boiler rooms that are mostly based abroad. High pressure sales tactics can also come by , post, word of mouth or at a seminar. Sometimes scams are also advertised in newspapers, magazines or online and appear as if they are genuine investment opportunities. In addition, be aware of money recovery scams which can be initiated by someone claiming to be from the police or a government agency. Organisations names vary but can include the National Fraud Intelligence Bureau and the US Securities & Exchange Commission. You should check the latest information on the Financial Conduct Authority (FCA) website at www. fca.org.uk/consumers/scams/what-to-do-ifyou-are-scammed for more details of scams pretending to be the police or a government agency. While high profits are promised, those who buy or sell shares in this way usually lose their money. The FCA found that even experienced investors have been caught out by share fraud and on average, share fraud victims lose an average of 20,000, with around 200m lost in the UK each year. If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company or research reports, you should take these steps before handing over any money: 1. get the name of the person and organisation contacting you 2. check the Financial Services Register (FSR) at to ensure they are authorised 3. use the details on the FSR to contact the firm 4. if you are based in the UK, call the FCA Consumer Helpline on if there is no telephone number on the FSR or you are told it is out of date 5. search the FCA s list of known unauthorised firms and individuals to avoid doing business with 6. remember that law enforcement and other agencies will not contact members of the public asking for their bank details or money 7. remember: if it sounds too good to be true, it probably is. If you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong. If you are approached about a share scam you should tell the FCA using the share fraud reporting form at consumers/scams, where you can find out about the latest investment scams. If you are based in the UK, you can also call the FCA Consumer Helpline on If you have already paid money to share fraudsters you should contact Action Fraud online at or, if you are based in the UK, by telephone on Corporate Information Financial Statements Strategic Report

186 184 Corporate Information Investor Information continued You can help us to reduce our environmental impact by opting to receive shareholder communications online at To help you find the information you re looking for, the key features of our investor relations website are highlighted below. > Reports Our reports can be accessed and/or downloaded from here. Investor presentations Links to results presentations, videos, press releases and webcasts. Shareholders queries We provide a number of services to help our shareholders manage their holdings, keep up to date with our progress and communicate with us. Register for ecomms You can help us to reduce our environmental impact by opting to receive electronic versions of shareholder communications (ecomms). We will donate 1 to RedR (Register for Engineers for Disaster Relief) for each shareholder who chooses this method of communication. Corporate Sustainability Find out more about our Corporate Sustainability strategy and performance by visiting this section of our website. Alerts Receive automated announcements and news by signing up to our alerting service. Latest financial news Access our latest financial press releases here. Share price Charts showing share price activity.

187 Cautionary statement This Annual Report has been prepared to provide information to the members of the Company. The Company and its directors and the Group s employees are not responsible for any other purpose of use or to any other person in relation to this Annual Report. This Annual Report contains indications of likely future developments and other forward looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and business segments in which the Group operates. These factors include, but are not limited to, those discussed under Principal risks and uncertainties (pages 44 to 47). These and other factors could adversely affect the Group s results, strategy and prospects. Forward looking statements involve risks, uncertainties and assumptions. They relate to events and/or depend on circumstances in the future which could cause actual results and outcomes to differ materially from those currently expected. No obligation is assumed to update any forward looking statements, whether as a result of new information, future events or otherwise. Nothing in this Annual Report should be construed as a profit forecast. This Annual Report is printed on Cocoon Offset 100% recycled paper made from post-consumer collected waste and manufactured to the certified environmental management system ISO It is PCF (Process Chlorine Free), totally recyclable and has biodegradable NAPM recycled certification. The Atkins logo, Carbon Critical Design and the strapline Plan Design Enable are trademarks of Atkins Limited, a WS Atkins plc company. WS Atkins plc except where stated otherwise. Designed and produced by Instinctif Partners TT-COC

188 By printing 2,000 copies of this Report on Cocoon Offset 100% recycled paper the environmental impact was reduced by: 1,787 kg of landfill 37,171 litres of water 3,425 kwh of energy 264 kg CO 2 and greenhouse gases 2,904 kg of wood Source: Carbon footprint data evaluated by Labelia Conseil in accordance with the Bilan Carbone methodology. Calculations are based on a comparison between the recycled paper used versus a virgin fibre paper according to the latest European BREF data (virgin fibre paper) available. Results are obtained according to technical information and are subject to modification.