Annual Report 2016 - Atkins [PDF]

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Annual Report 2016 WS Atkins plc

WS Atkins plc Annual Report 2016

WS Atkins plc Registered in England Company no. 1885586 WS Atkins plc Woodcote Grove Ashley Road Epsom Surrey KT18 5BW England

Atkins is one of the world's most respected design, engineering and project management consultancies. We build long-term trusted partnerships to create a world where lives are enriched through the implementation of our ideas.

Contents Our business How we CREATE value Our core business is helping our clients to plan, design and enable major capital programmes. The solutions we provide range from upfront strategic advice to large, outcome-focused programme • management engagements.

Our strategy How we DELIVER value Our strategy is to focus on revenue growth and selectively to increase our geographic footprint and capabilities through targeted international expansion organically and by acquisition.

•

Our people How we BUILD a winning culture We aim to attract the best people and continually develop their capabilities so that we can deliver outstanding solutions for our clients.

•

Our responsibility How we ENABLE a sustainable future Within our corporate sustainability reporting we showcase the expertise and drive that exists within Atkins to support our clients to tackle sustainability challenges. The future depends on what • we do today.

You can help us to reduce our environmental impact by opting to receive shareholder communications online at: www.atkinsglobal.com/investors

WS Atkins plc Annual Report 2016

01

STRATEGIC REPORT

Strategic Report > Contents

GOVERNANCE

Our Group

02

Our Board of directors

52

Chairman’s statement

04

Directors’ report

56

06



Our business

08

Directors' statement of responsibility 60



Strategy 2011–16

10

Corporate governance report

61 69



Strategic growth drivers

12

Nomination Committee report



Our strategy

14

Audit Committee report

73

Remuneration report

80

CEO's business review

16

Financial review

18

Our segments

20

Segmental performance

UK and Europe

22



North America

26



Middle East

28



Asia Pacific

31



Energy

33

Principal risks and uncertainties (including viability statement)

36

Our people

42

Our responsibility

46

Independent auditor’s report

199

Financial calendar

199

Shareholder services

199

112

FINANCIAL STATEMENTS Contents of Financial Statements 120 Consolidated Income Statement 121 Consolidated Statement of Comprehensive Income

122

Consolidated and Parent Company Balance Sheets

123

Consolidated and Parent Company Statements of Cash Flows

124

Consolidated Statement of Changes in Equity

125

Parent Company Statement of Changes in Equity

126

FINANCIAL STATEMENTS

Our business model

Company secretary and registered office

GOVERNANCE

INVESTOR INFORMATION

Notes to the Financial Statements 127 Five year summary

196 INVESTOR INFORMATION

STRATEGIC REPORT

WS Atkins plc Annual Report 2016

02

Our Group We have delivered a strong set of results despite an increasingly challenging macroeconomic environment.

Our results During the year, we also delivered on the strategic objective that we set out in 2011 with the achievement of our 8% underlying operating margin goal.

Revenue £m

Underlying profit before tax £m

£1,861.9m £139.0m 16

1,861.9

16

15

1,756.6

15

14

1,750.1

14

139.0 121.9

Underlying diluted EPS pence

107.3p 16

107.3

15

106.4

14

13

1,705.2

13

99.2

13

12

1,711.1

12

101.6

12

97.1 85.7 82.6 79.0

+6.0%

+14.0%

+10.5%

Headcount

Dividend pence

Underlying operating margin %

18,052

39.50p

8.0%

16 15 14 13 12

18,052 18,462 17,489 17,899 17,420

-2.2%

16 15 14 13 12

+8.2%

39.50 36.50 33.75 32.00 30.50

16

8.0

15 14

7.6 6.7

13

6.4

12

6.5

+0.4pp

Notes: 1. Underlying operating profit is profit before exceptional items, amortisation of acquired intangibles, and deferred acquisition payments. In addition, 2015 excludes impairment of goodwill. 2. Underlying operating margin is the value of underlying operating profit expressed as a percentage of revenue. 3. Underlying profit before tax additionally excludes net loss on disposal of businesses of £3.1m (2015: profit £0.4m).

WS Atkins plc Annual Report 2016

4. Underlying diluted EPS is based on underlying profit after tax and allows for the dilutive effect of share options. 5. Headcount is shown on a full time equivalent basis, including agency staff. 6. Dividend relating to the year comprises the interim dividend paid in the year and the proposed final dividend.

Strategic Report > Our Group

03

STRATEGIC REPORT

Our reporting is structured into five segments reflecting how we manage the business in different geographies and markets.

Our markets

GOVERNANCE

Details of our activities and results by business segment are shown in the segmental reporting section.

End market analysis UK and Europe Defence and security Aerospace and aviation

1% 2%

Roads

2% 1%

Water and environment

1%

3%

2%

1%

3%

2%

Other

2%

3%

Education

Rail

5%

2%

1%

1%

1%

8%

4%

4%

Defence and security

1%

Aerospace and aviation

1%

1%

Water and environment

1%

1%

Other

1%

8%

Roads

FINANCIAL STATEMENTS

North America

1%

4%

Middle East 3%

12%

Asia Pacific 1%

1%

3%

Energy

20



4%

Public sector: local government

Regulated

Public sector: national government

Private sector

6%

INVESTOR INFORMATION

2%

FIND OUT MORE ABOUT OUR MARKETS

WS Atkins plc Annual Report 2016

04

Chairman’s statement "Our strategic focus has put us in a strong position to benefit from longer-term growth."

Allan Cook CBE Chairman

Performance I am pleased to report a strong set of results despite an increasingly challenging macroeconomic environment. During the year, we also delivered on the strategic objective we set out in 2011 with the achievement of our 8% underlying operating margin goal.

Macroeconomic environment While short-term market uncertainty, particularly around the reduced global oil price, exists in some of our segments, our strategic focus has put us in a strong position to benefit from longer-term growth. As urbanisation increases, international infrastructure spending is predicted to grow significantly in the medium term and we are well placed to benefit from this investment. We will do this through a clear focus on clients, collaboration and technology. In the UK, the infrastructure market in roads, rail and water remains well funded and investment continues to enjoy Government support. The March budget confirmed our expectations that capital investment for infrastructure projects will remain strong. At the same time, the economic environment and social policy, such as development of the Northern Powerhouse and ongoing development of major cities, offer significant opportunities.

Discover more online at:

In the context of the forthcoming EU referendum, the availability of talent in Europe as well as our European client base, are important factors for Atkins’ success. While we believe it is in Atkins’ best interest that the UK remains in the European Union, we do not believe that leaving Europe would constitute a material risk to the Group from an operational or financial perspective. In North America, the current political climate, along with economic and market conditions, have caused federal spending delays and long-term visibility around infrastructure investment remains uncertain ahead of the presidential election. The agreement reached on the five-year Fixing America’s Surface Transportation (FAST) Act legislation is encouraging and should provide greater pipeline visibility. The reduction in the global oil price continues to have a negative effect on the economic climate in the Middle East with lower levels of investment in infrastructure and transport. It also presents significant trading challenges to our oil and gas business, particularly in the UK and North America. By contrast, our oil and gas business in the Middle East continues to see investment and growth. In Asia Pacific, China’s growth rate continued to decline. While welcome, the programme of anti-corruption initiatives introduced by the Government during late 2014 has had the knock on effect of deferrals in the award of projects and a slowdown in payments. We are pleased that the political situation in Hong Kong is stabilising following last year’s pro-democracy demonstrations, but delays in project approvals continued.

www.atkinsglobal.com/investors

WS Atkins plc Annual Report 2016

Strategy We look for long-term relationships to understand clients’ needs, develop insight to inform our value propositions and choose the right opportunities to maximise the benefits of our expertise. In this financial year, our new UK operating model was implemented successfully. The formation in 2016 of a new infrastructure division, a single team with the collective expertise of our water, ground and environment, and design and engineering businesses, enables us to pursue large and complex projects more efficiently and effectively. It is improving our ability to collaborate, respond and leverage our technical capabilities for the benefit of our clients and creating more opportunities for employee mobility and variety in careers. In the Middle East, we brought together our rail and infrastructure capabilities into one market-facing division in April 2016. Activity is now underway to establish the combined transport and infrastructure strategy and structure in order to fully respond to the needs of clients. The primary focus will be on our core Middle East markets: United Arab Emirates (UAE), Qatar and Kingdom of Saudi Arabia (KSA). We will also explore further opportunities in Africa. We announced two strategic acquisitions during the year. In November 2015, EnergySolutions’ projects, products and technology (PP&T) business, which completed in April 2016 and complements our acquisition in 2014 of Nuclear Safety Associates. In March 2016, we announced an agreement to acquire Howard Humphreys in East Africa, an important catalyst for our combined operations to

05

STRATEGIC REPORT

Strategic Report > Chairman's statement

A more diverse and inclusive workforce will help to address the critical skills shortage in our industry and our commitment to build a more diverse organisation continues to gain momentum. We have increased the number of women’s professional networks around the world and continue to roll out our flexible working practices across the Group. At Atkins, we believe that our people are our competitive edge and I would like to thank them all for their outstanding contribution. We trust them to go above and beyond for the Group and our clients. Individual talent and collective expertise around the world help us to win and deliver vital and complex projects while meeting our strategic objectives.

Board of directors/governance We strive for a diversified Board with a wide range of experience, thought and perspective. We are pleased to have appointed two female non-executive directors this financial year and to now have 30% female representation on the Board, close to our aspiration of one third. During the year, we welcomed Catherine Bradley and Gretchen Watkins to the

Catherine brings significant corporate finance and acquisition experience obtained in the UK, Asia, the US and Europe. She is a non-executive director of the Financial Conduct Authority, the UK’s financial regulator, and PSA Peugeot-Citroën. Gretchen has significant experience gained over her 25-year career as an energy industry executive having held senior positions with Amoco Corporation, BP plc, Marathon Oil Corporation and most recently Maersk Oil, where she is chief operating officer. She holds a mechanical engineering degree. In June 2016 Fiona Clutterbuck temporarily became acting chairman of the Remuneration Committee. Raj Rajagopal will remain a member of the Committee but has recently stepped down as chairman due to ill health.

Dividend The Board is recommending a final dividend of 27.8p per ordinary share in respect of the year ended 31 March 2016, making the total dividend for the year 39.5p (2015: 36.5p), an increase of 8.2%. If approved at the Company’s annual general meeting, the dividend will be paid on 19 August 2016 to ordinary shareholders on the register on 8 July 2016. Further details regarding dividend payments can be found in Investor Information (page 199).

Markets continue to change and our business is evolving to address these changes. With substantial completion of the journey started in 2011, we are now setting out the next phase in our strategy. We will focus on revenue growth and selectively increase our geographic footprint and capabilities through targeted international expansion organically and by acquisition. Our main focus will be on energy, transportation and infrastructure. As detailed in the CEO's business review, our new international strategic advisory business – Atkins Acuity – sits at the heart of these focus sectors. We will measure our success in generating shareholder value through growth in underlying fully diluted earnings per share. More details can be found under strategic growth drivers (page 12). Three areas of differentiation form the basis of our evolved strategy: putting our clients at the centre of what we do, working more collaboratively and exploiting technology wherever we can to secure future profitable growth. With the hard work and support of a more diverse and inclusive workforce around the world we believe that we can make a difference to the world we live in. We remain confident for the year ahead despite continued uncertainties in some of our markets.

Allan Cook CBE Chairman 15 June 2016

WS Atkins plc Annual Report 2016

GOVERNANCE

We continue to work to attract more young people into pursuing a career in the engineering sector. During the year, we welcomed over 400 new graduates across the Group and accelerated our apprentice programme by recruiting 81 apprentices within our UK business.

Outlook

FINANCIAL STATEMENTS

People

Board. They joined as non-executive directors and members of the Nomination Committee. Catherine is a member of the Audit Committee and Gretchen joined the Remuneration Committee on 1 June 2016.

INVESTOR INFORMATION

develop our presence across East Africa’s rapidly growing infrastructure markets.

06

Our business model The primary objective of the Group is to deliver shareholder value through profitable growth.

Our business

Our strategy

gy ate Str

ENERGY

Pla nn ing

ON

NSPORT TRA AT I

ce pt develo p m e nt

Design

rin

g

on ct i n t s tru e Co n a ge m man

Enable

ADVISORY

Con

A m a n s set ag em e nt

Plan

pr Prog o je r a m ct m a m e a nd n ag e m e nt

D e s ig

n an

n de

g in

ee

IN

FR

ASTRUCTU

RE

How we CREATE value

How we DELIVER value

Our core business is helping our clients to plan, design and enable major capital programmes. The solutions we provide range from upfront strategic advice to large, outcome-focused programme management engagements.

Our strategy is to focus on revenue growth and selectively to increase our geographic footprint and capabilities through targeted international expansion organically and by acquisition.

View the latest information online at:

View the latest information online at:

www.atkinsglobal.com/business

Clients WS Atkins plc Annual Report 2016

www.atkinsglobal.com/strategy

Collaboration

Technology

07

STRATEGIC REPORT

Strategic Report > Our business model

Our responsibility I R EC T

CO N T R I B U T

ION

GOVERNANCE

IND

IBU

EC T

Environment

Business

TR

INDIR

TION

CO

N CT RE T IO DI IBU R NT

D N T I R EC RIB T UT IO

N

CL

T

CO

IEN

IEN

CL

T

Society

ON T

N CO

C

DIRECT CONTRIBUTION

O

N

IN

D

I

How we BUILD a winning culture

How we ENABLE a sustainable future

We aim to attract the best people and continually develop their capabilities so that we can deliver outstanding solutions for our clients.

Within our corporate sustainability reporting we showcase the expertise and drive that exists within Atkins to support our clients to tackle sustainability challenges. The future depends on what we do today.

View the latest information online at:

View the latest information online at:

www.atkinsglobal.com/people

www.atkinsglobal.com/responsibility

We aim to put our clients at the centre of what we do, work more collaboratively and exploit technology wherever we can to secure future profitable growth WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

TI

R

BU

T EC

RI

C L IEN T

INVESTOR INFORMATION

Our people

08

Our business Our core business is helping our clients to plan, design and enable major capital programmes. The solutions we provide range from upfront strategic advice to large, outcome-focused programme management engagements.

What we do

y teg a r St

Pla nn ing

Design

Our clients trust us with the management of projects, people and issues, ensuring that deadlines are met, costs are controlled and desired outcomes are delivered.

We design physical structures ranging from buildings, highways, bridges and tunnels, to offshore oil platforms. We also design management systems, business processes and advanced technology systems such as biometric scanners and superfast broadband networks.

rin

g

on ct i n t s tru e Co n a ge m man

Enable

pr Prog o je r a m ct m a m e a nd n ag e m e nt

WS Atkins plc Annual Report 2016

D e s ig

d n an

en

g

e in e

Con

A m a n s set ag em e nt

We plan every aspect of our clients’ projects, from strategy, financial analysis and risk planning, feasibility studies and logistics, to impact assessments and stakeholder engagement activities.

ce pt develo p m e nt

Plan

09

Market size and share

Competitive environment

Design, engineering and project management 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, engineering and project management consultancies.

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 these surveys. However, we use the information available, together with our own industry knowledge, to develop our own best estimate of market share.

Due to the breadth of activities that the Group undertakes, competitors are often sector or service specific.

Large or particularly complex projects may only be able to be undertaken by organisations of scale, where a breadth of expertise and deep technical knowledge must be applied in combination to deliver the project. Our business may be characterised as follows: • we service public and private sector clients involved in complex infrastructure developments • we are a people business selling the specialist output from our talented teams

We estimate that the market for our skills in selected geographies is in excess of £100bn per annum 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 more than 5% 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.

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 that 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 barriers in more generalist areas of civil infrastructure design.

How we add value Our strength lies in our client relationships and the breadth and depth of our technical expertise, which enable us to provide practical solutions to the most complex challenges for clients.

FINANCIAL STATEMENTS

Our business model

GOVERNANCE

STRATEGIC REPORT

Strategic Report > Our business

• the services we provide demand high end critical thinking and expert judgement

INVESTOR INFORMATION

• we operate in many parts of the world and in many market sectors.

WS Atkins plc Annual Report 2016

10

Strategy 2011–2016 The overall strategy for the Group was established and communicated in 2011, when we set out the primary objectives and the three pillars that formed the basis of our strategic activity.

Group strategy The three pillars of our strategy set out in 2011 were operational excellence, portfolio optimisation, and sector and regional focus. Annual reviews have tested the progress and continuing relevance of each aspect of the strategy.

Pillars and progress Pillar

Description

Progress

Operational excellence

We set a path of improved operational performance across the Group as a foundation for our progress towards our medium-term operating margin target – including an emphasis on optimising financial delivery on our projects, with a continued focus on utilisation, margin, and billing and cash collection.

We have made very good progress with our operational excellence programme including streamlined organisational structures in all four of our geographic regions.

Portfolio optimisation

To ensure we are well positioned for the future we instigated an ongoing review of the businesses in our portfolio, continuing to focus the Group on higher growth, higher margin activities.

We made excellent progress in this area over the last several years with the sale of our sub-scale businesses in Poland and Portugal, the UK highways services operations and the disposal of the Peter Brown construction management at risk business.

Sector and regional focus

It is clear that a number of our existing sectors have attractive growth prospects. We established areas of particular focus for investment – these have changed over time and in 2015/16 comprised Energy and the regions of Asia Pacific and North America.

The sectors and regions have evolved over time. Energy in particular has been an important area of focus as a sector addressing global clients and has benefited from ongoing investment.

WS Atkins plc Annual Report 2016

11

6.7%

12

13

14

15

16

We have achieved our underlying operating margin target in 2016

margin

Strategic objectives and progress Objective

Description

Progress

Operating margin

We outlined our primary objective of developing the operating margin as a key target and determinant of quality of business. We set a medium-term target to generate an underlying operating margin above 8% across the Group.

We have delivered our target with a reported underlying operating margin of 8% this year.

Geographic balance

We originally added a subsidiary objective to adjust the geographic balance of the Group’s operations over time and set a broad aim to generate more of our revenue from our non UK and Energy businesses. The initial target suggested we should aspire to have less than 25% of our revenue being derived from the UK.

While investment, particularly for acquisitions, has focused outside the UK, the good performance of the UK itself means that it has continued to play an important part in the Group’s development. The drive to diversify from our home market remains important.

Growth organically and by acquisition

We noted that we would continue to direct investment into areas in which we see value as we look to grow organically and supplement that growth by appropriate acquisitions.

Organic and acquisitive growth has offset the reduction in revenue from disposals. Over the last few years, we have announced the acquisition of PP&T, Howard Humphreys (East Africa), Nuclear Safety Associates, Houston Offshore Engineering, Confluence Project Management and Terramar.

WS Atkins plc Annual Report 2016

GOVERNANCE

6.4%

8.0%

FINANCIAL STATEMENTS

6.5%

7.6%

INVESTOR INFORMATION

Strategic evolution

STRATEGIC REPORT

Strategic Report > Strategy 2011–2016

12

Strategic growth drivers Markets are changing and our own business is evolving. With substantial completion of the journey started in 2011, we are now setting out the next phase of our strategy.

Economic growth

Urbanisation

Economic growth is projected over the next few years particularly in emerging markets, but 2016 sees continued volatility in a number of areas of the world.

Urbanisation continues apace, particularly in developing markets. 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.

Implication As PwC notes in a report on economic growth projections (The World in 2050), global strategies need to strike the right balance between mature, lower-risk, advanced economies and faster growing but generally higher-risk emerging markets.

WS Atkins plc Annual Report 2016

This will create ongoing demand for strategy, planning, design and engineering, and project and programme management services.

13

Demographics

Technology

Resources

As we change the way in which we work, society is also adapting and ageing. According to the UN, two thirds of the growth in the overall population to 2060 will be in the 40-to-79 year age group.

The scope, scale and economic impact of changes in technology are accelerating, with businesses either disrupting their markets and competition, or being disrupted themselves.

Oil prices are expected to remain low over the medium term and the geopolitical landscape remains subject to some uncertainty.

Technological advances in the design and engineering of projects are already having an impact on our industry.

The implications of lower fossil fuel prices in the near term and the longer-term move to energy production with a lower carbon impact provide a number of engineering challenges. INVESTOR INFORMATION

This will have implications for the way we work as the priorities and needs of the population and infrastructure change. Equally there will be implications regarding our available workforce.

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

Strategic Report > Strategic growth drivers

WS Atkins plc Annual Report 2016

14

Our strategy Our strategy is to focus on revenue growth and, selectively, to increase our geographic footprint and capabilities through targeted international expansion organically and by acquisition.

Strategic objectives

Focus

Our goal is to generate shareholder value measured by growth in underlying fully diluted earnings per share. We will achieve this objective by growing underlying operating margins in all our businesses to 8% and then growing revenue where businesses are already consistently at or above 8%.

Our main focus will be on energy, transportation and infrastructure. We have launched Atkins Acuity – offering seamless end-to-end advisory services to our clients worldwide. We will undertake careful and selected regional expansion, exploring the potential in North America, southeast Asia and Africa. We will continue to focus the Group on higher growth, higher margin activities. • Highways and intelligent transport systems • Rail and urban transport • Aviation • Ports and coastal

NSPORT TRA AT I

ENERGY

ON

• Nuclear

View case studies online at: www.atkinsglobal.com/ transportation

• Oil and gas • Conventional power

ADVISORY

• Renewables

View case studies online at: www.atkinsglobal.com/ energy

• Strategic and economic planning • Organisation development

IN

FR

ASTRUCTU

RE • Urban development

• Operations improvement

• Property

• Due diligence

• Security • Water and environment

View case studies online at: www.atkinsacuity.com

WS Atkins plc Annual Report 2016

View case studies online at: www.atkinsglobal.com/ infrastructure

15

Acuity is the new advisory business from the Atkins Group. We help to successfully deliver our clients’ ambitions in infrastructure and energy, worldwide. Combining deep business acumen with the engineering expertise of Atkins, we offer seamless, end-to-end advisory services that build higher value, more rewarding partnerships.

STRATEGIC REPORT

Strategic Report > Our strategy

Differentiation

Collaboration

Technology

Our thought leadership, key account management and agility place us well for increased client intimacy and focus. We strive to reduce anything that distracts us from winning work and delivering for our clients.

External partnerships provide both domestic and international opportunities to grow faster. Internal cooperation drives more effective working to win and execute large programmes.

We are pursuing advances in design and engineering. Innovation and research & development is taking place in client programmes and Group activities.

Action

We will collaborate more externally (by selecting and engaging with specific partners or alliances) and internally (especially using our global design centres in Bangalore and Delhi in India).

We will invest in technology and innovation for growth. The initial investment areas will include: • Digital engineering • Intelligent mobility • Digital enterprise asset management • Renewables.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

We will progress our client-centric growth programme implementing quantitative goals to enhance revenue in the key accounts across the Group.

FINANCIAL STATEMENTS

Clients

GOVERNANCE

Three areas of differentiation form the basis of our evolved strategy. We aim to put our clients at the centre of what we do, work more collaboratively and exploit technology wherever we can to secure future profitable growth.

16

CEO’s business review “We reached our 8% underlying operating margin goal despite challenging conditions in some of our markets.” Prof Dr Uwe Krueger CEO

We delivered a strong set of results this year. I am particularly pleased to have reached our 8% underlying operating margin goal against a challenging backdrop in some of our markets, while also making progress on optimising our portfolio with strategic acquisitions. I would like to thank all of our people for the consistent dedication and hard work that has made this achievement possible.

Underlying diluted EPS increased 10.2p per share to 107.3p (2015: 97.1p), an increase of 10.5%.

Work to improve efficiencies and earnings is ongoing. Our focus now will be on driving revenue through: developing and using advanced technology; further selective acquisitions; and organic growth. Greater collaboration, client proximity and technology are fundamental to our ability to differentiate ourselves from our competitors, to win more work and to exceed client expectations. Each of these actions will play its part in helping us to maintain our 8% margin and grow the business.

As at 31 March 2016, the Group had secured 44% (2015: 51%) of budgeted revenue for the coming financial year. This excludes the recently awarded Purple Line and the activities of PP&T.

Review of the year This has been a strong year in terms of our financial performance. Our underlying profit before tax was £139.0m, an increase of 14.0% (2015: £121.9m), on revenue that increased 6.0% to £1.86bn (2015: £1.76bn). In the current year, the reported profit before tax was £131.1m (2015: £106.7m). Underlying operating profit was £148.2m (2015: £134.1m), at an improved underlying margin of 8.0% (2015: 7.6%). Reported operating profit was £143.4m (2015: £118.5m), at a margin of 7.7% (2015: 6.7%). We believe underlying profit is a more representative measure of performance, removing the items that may give a distorted view of performance. A breakdown of the items that we adjust to calculate underlying profit is given in the Financial review (page 18).

WS Atkins plc Annual Report 2016

Operating cash flow in the year was £116.1m (2015: £133.9m), representing 78.3% (2015: 99.8%) of underlying operating profit. The Group’s liquidity remains strong with closing net funds of £191.7m (2015: £179.3m).

Our UK and Europe business delivered very good results with a 21.6% increase in operating profit to £73.8m (2015: £60.7m). Revenue rose to £943.6m and margin improved by 1.1pp to 7.8%. This has been a transitional year for our North America business with the start of a portfolio shift towards larger projects and programmes. During the year, we were delighted to be appointed on Project NEON for Nevada Department of Transportation and the Purple Line light rail project in Maryland, both significant wins for the region. Revenue has risen to £362.6m (2015: £341.4m), at a margin of 5.6% (2015: 5.9%), which reflects high levels of bidding activity in support of growth. Our Middle East business delivered another very good overall performance this financial year with revenue up 14.6% to £248.3m and operating profit up 31.1% on last year driven by the Central Planning Office project in Qatar and peak delivery on metro projects. Operating margin improved to 11.9%. However, cash flow was not without its challenges in a region coming under increased liquidity pressure as a result of the current oil price.

In our Asia Pacific region an operating margin of 8.0% was achieved on revenue of £106.1m. Our profitability and cash flow performance were impacted by delays to the start of a number of key opportunities and cash receipts from clients beyond agreed contract terms. Our Energy business has had a mixed year, with a good performance in our nuclear, power and renewables businesses but challenges in most of our oil and gas markets, with the exception of the Middle East. Revenue rose to £201.3m (2015: £182.0m) due in part to the benefit of acquisitions in the second half of last year. However, both operating profit at £16.7m and margin at 8.3% reduced reflecting continued pricing pressure and the impact of the deferral and cancellation of some projects in the oil and gas market. A more detailed segmental analysis follows (starting on page 20). We outline their financial performance in the period, their strategy, 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 people-related matters.

Strategic developments In March 2016, agreement was reached on the acquisition of Howard Humphreys (East Africa), subject to normal regulatory clearances. This multidisciplinary consultancy, based in Kenya and Tanzania, employs around 200 people and has a strong track record in the transportation, water and property markets. The acquisition is an important catalyst to develop our presence within East Africa’s rapidly growing infrastructure market.

Strategic Report > CEO's business review

17

Group accident incident rate (AIR)

16

In April 2016, we were delighted to complete the acquisition of PP&T. PP&T is an innovative 650 person nuclear business that delivers a wide range of technical engineering and programme management services for the decontamination and decommissioning of high hazard nuclear facilities. Atkins now has some 1,800 people working on nuclear projects around the world. This acquisition accelerates our nuclear strategy and creates a global platform. Our combined business is well positioned in major nuclear markets in North America, the UK, Europe, the Middle East and Asia Pacific. In the US, which has the largest nuclear fleet, we are now in the top tier for decommissioning, site operations, major projects and consultancy. We are investing to create a new advisory business – Atkins Acuity – offering seamless end-to-end advisory services to our clients worldwide. It has developed a structure, operation and pipeline of opportunities at the heart of our focus sectors of energy, transportation and infrastructure and is creating new revenue opportunities for us. The backing of Atkins’ technical expertise and reputation for delivery combined with our new offerings in project structuring and financing have already delivered wins in critical infrastructure projects and programmes in the Middle East, southeast Asia and Africa.

Priorities Work to implement our strategy will continue as we integrate our new PP&T colleagues and complete the acquisition of Howard Humphreys. Our new advisory business will help to successfully deliver our clients’ ambitions in infrastructure and energy, worldwide. Our aspiration over the next four to five years is to create a business with £200m turnover. Our approach is resonating well with our

Our 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.

GOVERNANCE

15

Safety in the workplace and on our project sites is paramount.

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 undertaken. 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. 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 Our responsibility (page 46). As a people business, staff turnover is an important metric for us and shows the rate at which staff choose to leave the Group. KPIs for the year ended 31 March 2016 are shown in the Financial review (page 18), along with prior year comparatives. target clients who recognise that we bring something different by combining our deep business acumen with the technical expertise of Atkins.

the client at the heart of what we do, working more collaboratively and exploiting technology positions us well for the coming year.

In conclusion This is a strong set of results and a year of significant strategic progress for the Group. Our reputation as a technically expert, sustainable and responsible organisation is vital to our continued success. These principles and qualities are valued by our clients and differentiate us from our competitors. I believe our focus on putting

FINANCIAL STATEMENTS

77

Prof Dr Uwe Krueger CEO 15 June 2016

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

14

77

STRATEGIC REPORT

130

18

Financial review “We have delivered strong results with underlying profit before tax up 14.0% to £139.0m and revenue growth of 6.0% to £1.86bn.” Heath Drewett Group finance director

Performance summary As outlined in the CEO's business review, we have had a good year and I am pleased with the progress made and results achieved. Our underlying profit before tax (PBT) was £139.0m, an increase of 14.0% over last year’s profit of £121.9m, on revenue that increased by 6.0% to £1.86bn (2015: £1.76bn). Key performance indicators

Note

2016

2015

Change

£1,861.9m

£1,756.6m

+6.0%

£143.4m

£118.5m

+21.0%

£148.2m

£134.1m

+10.5%

7.7%

6.7%

+1.0pp

Financial metrics Revenue Operating profit Underlying operating profit

1

Operating margin Underlying operating margin

2

8.0%

7.6%

+0.4pp

Underlying PBT

3

£139.0m

£121.9m

+14.0%

£116.1m

£133.9m

-13.3%

Net funds

4

£191.7m

£179.3m

Underlying diluted EPS

5

107.3p

Work in hand

6

44%

51%

-7pp

Safety – AIR

7

77

77

n/a

8

18,052

18,462

-2.2%

18,416

17,898

+2.9%

12.5%

12.0%

+0.5pp

Operating cash flow

97.1p

+6.9% +10.5%

Average staff numbers Staff turnover

2015

£m

£m

Change

139.0

121.9

+14.0%

4.7

(4.4)

Having adjusted for: Exceptional items Impairment of goodwill

–

(2.8)

Amortisation of acquired intangibles

(6.3)

(6.9)

Deferred acquisition payments

(3.2)

(1.5)

Net (loss)/profit on disposal of businesses

(3.1)

0.4

131.1

106.7

Profit before tax

+22.9%

Underlying operating profit was £148.2m (2015: £134.1m) at an improved underlying margin of 8.0% (2015: 7.6%) and adjusts for the items referred to above with the exception of the net loss on sale of £3.1m (2015: £0.4m profit). Reported operating profit was £143.4m (2015: £118.5m), at a margin of 7.7% (2015: 6.7%). Headcount closed the year at 18,052 (2015: 18,462), reflecting reductions in the Middle East and Asia Pacific and the sale of our business in Portugal.

Net finance costs

People Staff numbers 31 March

Underlying PBT

2016

9

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 adjusted profit removing exceptional net gains totalling £4.7m (2015: £4.4m loss) along with amortisation of acquired intangible assets of £6.3m (2015: £6.9m), deferred acquisition payments of £3.2m (2015: £1.5m) and a loss on disposal of business of £3.1m (2015: £0.4m profit). The exceptional net gain referred to above of £4.7m (2015: £4.4m loss) is made up of a profit on the disposal of property of £6.5m (2015: £nil), a pension curtailment gain of £1.5m (2015: £nil) and acquisition transaction costs of £3.3m (2015: £4.4m). The unadjusted reported profit before tax was £131.1m (2015: £106.7m).

Net finance costs were £11.0m (2015: £14.5m). The year on year decrease was primarily the result of the decrease in the net finance costs on net post-employment benefit liabilities in the UK.

Tax The Group’s income tax expense for the year was £27.7m (2015: £21.0m), giving an effective tax rate of 21.1% (2015: 19.7%). The Group’s underlying effective tax rate was 22.5% (2015: 20.1%). The increase in the effective tax rate is primarily due to the impact of the UK tax rate changes on the value of deferred tax assets and increased taxes on overseas income at higher rates than the UK.

Earnings per share (EPS) Basic EPS from continuing operations was 106.0p (2015: 87.8p). Underlying diluted EPS on continuing operations was 107.3p (2015: 97.1p), an increase of 10.5%.

Notes:

1. Underlying operating profit is profit before exceptional items, amortisation of acquired intangibles, and deferred acquisition payments. In addition, 2015 excludes impairment of goodwill. 2. Underlying operating margin is the value of underlying operating profit expressed as a percentage of revenue. 3. Underlying profit before tax additionally excludes net loss on disposal of businesses of £3.1m (2015: profit £0.4m). 4. Net funds comprise cash and cash equivalents plus financial assets and loan notes receivable less borrowings.

WS Atkins plc Annual Report 2016

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. 7. The 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.

Strategic Report > Financial review

Revenue by segment %

24 Rail (including mass transit)

6 Aerospace and aviation

18 Roads

6 Urban development

19 Public sector: local government 20 Public sector: national government

51 UK and Europe 19 North America

14 Energy

5 Buildings

17 Regulated

13 Middle East

9 Defence and security

3 Education

44 Private sector

7 Water and environment

8 Other

6 Asia Pacific 11 Energy

Funding and charges Pension deficit contributions of £32.8m (2015: £32.0m) were made to the Atkins Pension Plan (the Plan) during the year. Under the latest agreed recovery plan the Group will contribute £33.6m to the Plan for the year ending 31 March 2017, with annual contributions escalating by 2.5% each year until 31 March 2025. The total charge to the Consolidated Income Statement in respect of defined benefit schemes was £11.0m (2015: £16.0m), comprising current service cost of £2.6m (2015: £2.2m), administrative expenses of £0.2m (2015: £0.2m), a net interest expense of £9.7m (2015: £13.6m) and a curtailment gain of £1.5m (2015: £nil) in the Railways Pension Scheme. The charge relating to defined contribution schemes increased to £43.3m (2015: £39.8m). IAS 19 (revised 2011) – valuation and accounting treatment The Group determines pension scheme funding with reference to actuarial valuations, but for reporting purposes uses IAS 19 (revised 2011). Under this Standard the Group recognised a reduced retirement benefit liability of £265.3m at 31 March 2016 (2015: £298.4m). The assumptions used in the IAS 19 (revised 2011) valuation are detailed in note 30 to the Financial Statements (page 173).

Cash Net funds as at 31 March 2016 were £191.7m (2015: £179.3m), made up as follows: 2016

2015

£m

£m

419.3

235.4

Loan notes receivable

20.1

21.8

Financial assets at fair value through profit or loss

32.9

33.4

(7.0)

(61.0)

(273.5)

(50.2)

Borrowings due no later than one year Borrowings due later than one year Finance leases Net funds

(0.1)

(0.1)

191.7

179.3

Closing borrowings and cash and cash equivalents at 31 March 2016 increased to prepare for the funding of the PP&T acquisition shortly after year end. Cash generated from continuing operations was £116.1m (2015: £133.9m), representing 78.3% (2015: 99.8%) of underlying operating profit and is summarised below. Critical accounting policies

The Group’s principal accounting policies are described in note 1 to the Financial Statements (page 127). The Financial Statements for the year ended 31 March 2016 have been prepared under International Financial Reporting Standards (IFRSs) as adopted by the EU.

2015

£m

£m

142.1

121.2

Add: depreciation

18.2

16.3

Add: amortisation and impairment

11.9

15.8

172.2

153.3

Profit before interest and tax

EBITDA Comprising:

173.8

158.8

– Exceptional items

– Underlying EBITDA

4.7

(4.4)

– Deferred acquisition payments

(3.2)

(1.5)

– Net (loss)/profit on disposal of businesses

(3.1)

0.4

172.2

153.3

Pensions deficit funding

(32.8)

(32.0)

Movement in working capital

(26.5)

3.8

0.1

(1.3)

Movement in provisions

0.5

(0.7)

Income from other investments

(1.1)

(2.2)

Other non-cash items

3.7

13.0

116.1

133.9

Movement in non-current payables

Operating cash flow

The movement in non-cash items of £3.7m (2015: £13.0m) consists primarily of foreign exchange costs and share based payments. Net tax paid amounted to £36.8m (2015: £17.8m) with the increase due primarily to a one-off payment for consortium loss relief and overpayments in prior periods now largely utilised. Net capital expenditure in the year, including the purchase of computer software licences, amounted to £17.3m (2015: £25.2m).

Capital structure

GOVERNANCE

2016

FINANCIAL STATEMENTS

Pensions

Cash and cash equivalents

STRATEGIC REPORT

Revenue by client type %

As at 31 March 2016, the Group had shareholders' funds of £289.3m (2015: £205.0m). The Company had shareholders' funds of £224.4m (2015: £196.3m) and 104.5m fully paid ordinary shares in issue at 31 March 2016 (2015: 104.5m). For further details, refer to note 32 to the Financial Statements (page 184).

Outlook We finish the year in a strong position with operating cash flow of £116.1m and year end net funds of £191.7m. Our underlying fully diluted EPS, our strategic measure of our success in generating shareholder value, is up 10.5% at 107.3p and gives us confidence for the year ahead.

Heath Drewett Group finance director 15 June 2016

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Revenue by sector %

19

20

Our segments Overview of the business and our performance during the year.

Contribution to Group revenue 51% 19%

Revenue 1

Operating profit Operating margin Staff numbers 2

Market

UK and Europe

North America

£943.6m £73.8m 7.8% 9,591

£362.6m £20.4m 5.6% 2,747

Strong demand for infrastructure with UK National Infrastructure Plan – large project pipeline includes High Speed 2, Crossrail 2, Thames Tideway Tunnel, Heathrow expansion

Government and private investment in infrastructure expected to continue

Well funded markets in rail, roads and water Continuing pressure from the UK Government for value for money Scarce specialist resources

Focus

1. Revenue includes internal trades. 2. Full time equivalent staff at 31 March 2016 including agency staff. 3. There are an additional 95 staff undertaking Group functions.

WS Atkins plc Annual Report 2016

Legacy infrastructure ageing – transportation, water, ports Transportation funding challenges at the federal, state and local levels Federal priorities aligned to spending bills The FAST Act should provide greater pipeline visibility

Focus on core sectors – driving growth in well funded, transport and infrastructure markets

Grow core market leading business in transportation targeting key expansion opportunities

Growth in major projects in roads and rail

Progressively develop federal offering and target large infrastructure programmes at state, municipal and city level

Continued activity in selected water markets and property sector Focus on security and intelligence 22 FOR MORE INFORMATION

26 FOR MORE INFORMATION

21

STRATEGIC REPORT

Strategic Report > Our segments

6%

11%

Asia Pacific

Energy

£248.3m £29.5m 11.9% 2,459

£106.1m £8.5m 8.0% 1,354

£201.3m £16.7m 8.3% 1,806

Continued growth anticipated and, despite low oil price, large capital investment programmes expected to continue particularly in rail and metro sector, albeit at a slower pace

The Hong Kong market for major infrastructure developments has become more challenging

Energy demand is forecast to increase over the long term – but there are a number of short- to medium-term challenges

China has been impacted by the economic slowdown and the Government’s anti-corruption measures

Oil price uncertainty may continue to impact investment

Economic diversity, population growth and urbanisation driving requirements

FINANCIAL STATEMENTS

Middle East

GOVERNANCE

13%

Multidisciplinary integrated services for clients with sector-led focus on major projects and programmes in rail, infrastructure and property Geographic focus in the growth markets of the KSA, Qatar, UAE and Africa

Maintain position in public infrastructure in Hong Kong with continued diversification

Continue to operate across the energy sector with a particular emphasis on nuclear

Consolidate property activity in urban planning, architecture and design in mainland China

Maintain core business in supporting existing assets primarily in the UK Increase design activity

Follow Chinese contractors internationally Grow presence in southeast Asia

28 FOR MORE INFORMATION

31 FOR MORE INFORMATION

33 FOR MORE INFORMATION

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Strong demand for advisory services in southeast Asia

22

Segmental performance UK and Europe Double digit growth in operating profit and positive outlook Key performance indicators

2016

2015

Change

£943.6m

£903.8m

+4.4%

£73.8m

£60.7m

+21.6%

7.8%

6.7%

+1.1pp

44.4%

45.3%

-0.9pp

83

105

-22

Staff numbers at 31 March

9,591

9,642

-0.5%

Average staff numbers for the year

9,707

9,405

+3.2%

11.3%

11.9%

-0.6pp

Financial metrics Revenue Operating profit Operating margin Work in hand Safety – AIR People

Staff turnover

Performance Our UK and Europe business delivered very good results with a 21.6% increase in operating profit to £73.8m (2015: £60.7m). Revenue rose to £943.6m and margin improved by 1.1pp to 7.8%.

Business model Our focus is on planning, designing and enabling our clients’ capital programmes and projects in and around infrastructure and transportation, as well as providing engineering consultancy services to wider markets. We are increasingly active in the digital economy including intelligent mobility which is about how we connect people, places and goods across transportation networks. Our Europe business is primarily focused on the rail and highways infrastructure markets in Scandinavia. We are a technical consultancy, providing advice, design and engineering together with project management skills for public and private sector clients. Added resilience is brought to our UK business by its ongoing support for projects in other regions, together with the use of our global design centres in India, which provide flexibility of delivery and access to high quality, lower cost resources. In this financial year, we implemented successfully our new UK operating model, which reorganised the business from six into four market-facing divisions. Our

WS Atkins plc Annual Report 2016

market-led approach places greater emphasis on aligning more closely with the needs of our key clients, and is supported by our practices, which provide cross-sector technical skills and resource flexibility to our projects. During the year, we identified a further opportunity to consolidate our design and engineering, and water, ground and environment divisions. This new infrastructure division will enable us to pursue large and complex projects, particularly in the cities and urban development market, more efficiently and effectively as a single team.

Strategy Our strategy focuses on maintaining our market leadership positions in the UK and realising the opportunities arising from the UK Government’s continued commitment to infrastructure investment and from regulatory spend in rail, utilities and airports. Our aerospace, defence and security markets provide diversity to our infrastructure exposure. Our operational excellence programme continues to improve the underlying processes of the business, ensuring increased time to focus on our clients’ needs and project delivery. We aim to be innovative in the delivery of the largest and most complex, longterm projects and to support other Group businesses with our specialist expertise.

Our ability to leverage skills and capability from a variety of industry sectors and professional disciplines provides a strong proposition to our clients. We see multiple opportunities for our broad, multidisciplinary offering, providing good growth potential.

Business drivers The UK economic environment and social policy, such as development of the Northern Powerhouse, the roads investment strategy and ongoing development of major cities such as London, Birmingham and Manchester, significantly affect the opportunities available to our business. The digital economy, with its forward-thinking use of technology in areas such as intelligent mobility, is another increasingly important driver for our business. Our diversified portfolio provides resilience against market fluctuations, as does the fact that a number of our most important markets remain well funded. Scandinavian markets continue to benefit from investment in infrastructure from both the public and private sectors, providing stable market conditions.

Staff numbers at 31 March

£943.6m

£73.8m

9,591

16 15 14

943.6 903.8 998.3

16 15 14

73.8 60.7 62.6

16

9,591

15

9,642

14

9,544

+4.4%

+21.6%

-0.5%

Operations

projects for Network Rail, including the Stafford Area Improvement Programme and projects at East Kent and Cardiff. In December 2015, the East West Rail Phase 2 scheme was secured as part of our alliance with Volker Rail, Laing O’Rourke and Network Rail. This multi-year contract is expected to deliver up to £100m of revenue for the Group. In September, the five-year programme to improve capacity and the passenger experience at Birmingham New Street station, for which we were lead designer, was completed.

been appointed onto Scottish Water’s technical support consultancy contract as part of the ARC joint venture. The framework runs throughout the current Scottish Water SR15 business plan period (2015–2021).

The infrastructure market in UK roads, rail and water remains well funded and investment continues to enjoy Government support. In particular, the Budget and Autumn Statement confirmed our expectations that capital investment for infrastructure projects will remain strong. Transportation Transportation has performed well this year. Our appointment by Highways England as one of its key suppliers on the Collaborative Delivery Framework (CDF) is proving successful and we are well positioned to bid on the largest projects. Under the CDF, Atkins and CH2M were awarded the detailed design contract for the £1.5bn A14 Cambridge to Huntingdon upgrade programme, and our joint venture with Jacobs was awarded the design contract for three smart motorway schemes. In joint venture with Arup, we achieved another key win in the second half of the year with Highways England which appointed us to develop proposals for a tunnel on the A303 near Stonehenge. The Hendy Review into project delivery in Network Rail resulted in some scheme delays and the extension of works programmes into the next spending control period. However, we are encouraged that the overall level of investment increased as a result of the review to £40bn. This included the funding of a significant number of our projects, particularly in the electrification programme, on the Great Western mainline between London and South Wales and the Midland mainline. We continue to deliver a range of complex

As part of a joint venture with CH2M and SENER, we have won a contract to become engineering delivery partner for High Speed 2. The contract, valued at between £250m and £350m for the consortium, is expected to run for 10 years and will see us provide engineering support for the delivery of phase 1 of the project which runs from London to Birmingham. Our investment to shape the future of transportation in the UK has made progress with leadership on intelligent mobility projects such as Venturer, the driverless vehicle pilot in Bristol, and FLOURISH, the BIS funded project to support the development of connected and autonomous vehicles. Water, ground and environment (WG&E) WG&E has had a good year. Our healthy pipeline of work from water utility clients includes our support for the delivery of the programmes for the 2015 to 2020 regulatory period asset management plan (AMP6) for Thames Water, Severn Trent Water and United Utilities. We have also

In January 2016, our joint venture with Arup was appointed to deliver a range of design and engineering services for the BMB joint venture between BAM Nuttall, Morgan Sindall and Balfour Beatty on the west section of London’s new sewer, Thames Tideway Tunnel. We are seeing increasing opportunities to cross-sell the skills and expertise within this business into the transportation and energy markets. For example, work on Crossrail and High Speed 2, and recent awards on major highways and other rail projects, are drawing on our specialist environmental and ground engineering teams. This was a key reason behind the decision to merge the WG&E and design and engineering businesses to create our new infrastructure division from April 2016. Design and engineering Our design and engineering business has performed well during the year with strong volumes and high productivity. The business saw continued growth in its core markets and works closely with the Group’s Energy business to deliver the buildings and infrastructure elements of major UK projects. Our proposition to local authorities and developers for residential-led regeneration and social infrastructure is developing with the recent appointment to design 600 new homes as part of a mixed-use regeneration scheme in West London.

WS Atkins plc Annual Report 2016

GOVERNANCE

Operating profit £m

FINANCIAL STATEMENTS

Revenue £m

STRATEGIC REPORT

23

INVESTOR INFORMATION

Strategic Report > Segmental performance – UK and Europe

24

Segmental performance – UK and Europe continued

In the education sector, the market remains active and continues to represent a significant proportion of our portfolio. Recently secured projects include work for the universities of Glasgow, Wolverhampton and Bournemouth and we will continue to focus on higher and further education opportunities. Our airports team is delivering significant programmes of work at London Heathrow and Gatwick, as well as to support the wider Group on international opportunities. Our defence infrastructure portfolio includes major programmes of work for BAE Systems and designing facilities for air and sea-based defence. We have also supported initial nuclear new build infrastructure work in the UK, including EDF Energy’s proposed new Hinkley Point power station, and remain involved in nuclear decommissioning work with our colleagues in the Energy business. Aerospace, defence, security and technology (ADS&T) ADS&T has had a mixed year. In aerospace, during the early part of the year workload was cancelled at short notice in North America and appropriate action was taken to reduce headcount further, particularly in North America and Europe. The position is now stabilising after securing a number of new and diversified contracts, including our alliance with Ausy to Airbus’ E2S multi-year framework. Our defence and security businesses traded well during the year, with increased volume flowing through ongoing contracts to deliver security work for central Government. Heathrow Airport’s IT outsourcing contract, in partnership with Capgemini, allows us to leverage our position in aviation. In holistic security, our team is delivering a range of projects, including a number of cyber security assignments for multinational private sector clients.

WS Atkins plc Annual Report 2016

Faithful+Gould Our UK business has performed well with a steady stream of work, particularly in higher and further education, as well as commercial property in London and the South East. Our work on the Scape Asset Management, Surveying and Design Services public sector framework has provided a steady stream of work and is subject to rebid this year. Project wins include appointments at the universities of Edinburgh and Glasgow and with Westminster City Council and CapInvest. We were pleased to win Construction Consultant/Surveyor of the Year at the Building Awards 2015. Our market position in the nuclear sector continues to grow as we work to develop opportunities with our Energy business and to support EDF Energy on the proposed Hinkley Point C with our renewed appointment for contract management and administration services. We successfully secured a place on Highways England's Specialist Professional and Technical Services framework. Europe Our core markets in Scandinavia remain well funded, with a strong pipeline of infrastructure projects and increasing opportunities to work with local contractors as well as public bodies. Workload in Denmark is stable across our major rail and road infrastructure projects including two major projects with Banedanmark – the signalling programme and the design of the new rail line between Copenhagen and Ringsted. The design and build project for bridges on this line is progressing well, with the bridges under construction. In Sweden, we continue to work on a number of large rail projects, including Hallsberg (TrV), HSL Mölnlycke (TrV) and the Molnby depot project, which is progressing into the detailed design stage.

We are focused on expanding our position in the Norwegian infrastructure and project management markets, helped by the successful integration of the Terramar project management consultancy. We have recently secured a rail infrastructure project as well as several important framework agreements. In the year, further progress on our portfolio optimisation strategy was made, with the disposal of our 48 person business in Portugal.

People Closing staff numbers reduced slightly to 9,591 (2015: 9,642), (UK: 8,873 (2015: 8,885); Europe: 718 (2015: 757)) after allowing for the disposal of the Portuguese business. Staff turnover decreased to 11.3% from 11.9%. In the UK, we continue to implement programmes to assist with the attraction, engagement and retention of talented people and are recognised by a number of independent organisations as a great place to work. We were once again named in The Sunday Times 25 Best Big Companies to Work For, appearing in the top 25 for the 10th time in 12 years. We are one of the largest and most popular recruiters of new graduate engineers and were shortlisted for the TARGETjobs most popular graduate recruiter in the construction, civil engineering and surveying sector in 2016. The ongoing promotion of science, technology, engineering and mathematics (STEM) careers to young people continues to be a focus. Over 500 STEM ambassadors took part in more than 350 STEM activities with schools, colleges and community groups, engaging with thousands of students. During the year, 383 young people joined the UK business on formal education and development programmes including 81 apprentices.

25

Revenue by client type %

Revenue by sector % 34 Rail (including mass transit) 15 Defence and security

14 Public sector: local government 27 Public sector: national government

14 Roads

28 Regulated

8 Water and environment

31 Private sector

STRATEGIC REPORT

Strategic Report > Segmental performance – UK and Europe

7 Aerospace and aviation 6 Education 4 Urban development 3 Buildings

In line with the rest of the Group, employee engagement is measured through our Viewpoint employee opinion survey. Across the region, our results in 2015 were unchanged compared with the previous year, a pleasing result given the reshaping of our UK business and the difficult conditions in some of our markets. The result continued to outperform the global norm for the professional services sector.

Safety and sustainability Workplace health, safety and wellbeing continue to be a high priority and our overall AIR has improved due to a reduction in the number of reportable accidents.

There is a risk in the medium and longer term of a shortage of professional technical staff in our industry. In 2015, we released a report, The skills deficit: consequences and opportunities for UK infrastructure, focusing on the challenges of an engineering skills shortage, which highlighted apprenticeships as one of the most effective ways to solve it. We have outlined in the Our people section (page 42) our approach to recruiting apprentices and sponsoring students and graduates to help mitigate this risk. We believe that the availability of talented engineers and scientists from Europe without restrictions means that it is in our best interests for the UK to remain within the EU. However, we do not believe that a vote to leave the EU would constitute a material risk to the Group from an operational or financial perspective. 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 30 for more details). 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 trustee, along with measures to manage ongoing volatility.

We assess risks across all of our businesses and this is explained in more detail in the Principal risks and uncertainties section (page 36).

Outlook Our secured work in hand in UK and Europe is 44.4% (2015: 45.3%) of next year’s budgeted revenue and, with the continued optimisation of our business in the UK, this gives us confidence for the year ahead. We see a healthy pipeline of opportunities in the UK, particularly in transportation and infrastructure markets. Our core markets in Scandinavia remain well funded and supported by government commitments. In the March Budget the Chancellor announced funding for improved connectivity in the Northern Powerhouse and the initial development of Crossrail 2. The Government has also committed to making a decision on south east airport capacity in the summer and the parliamentary process for phase 1 of High Speed 2 is in its final stages, with the intention for construction to begin in 2017. However, there may be some slowing of decision-making and in the award of major projects due to continued Government austerity measures.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

Focus on increasing the proportion of female employees continues and a range of flexible working options has been developed to help us both recruit and retain staff. We recruited 91 female graduates in the September 2015 intake, an increase of 4%.

Risks

INVESTOR INFORMATION

While we maintain our commitment to achieving gender diversity, the scope of our diversity and inclusion (D&I) activity is widening in the shape of a five-year D&I plan. The plan will be aligned with the 10 steps, developed by industry members and partners of the Royal Academy of Engineering and the WISE campaign in 2014.

GOVERNANCE

9 Other

26

Segmental performance North America Transitional year with significant wins Key performance indicators

2016

2015

Change

£362.6m

£341.4m

+6.2%

£20.4m

£20.0m

+2.0%

5.6%

5.9%

-0.3pp

49.1%

61.6%

-12.5pp

36

31

+5

Staff numbers at 31 March

2,747

2,735

+0.4%

Average staff numbers for the year

2,754

2,794

-1.4%

14.3%

10.7%

+3.6pp

Financial metrics Revenue Operating profit Operating margin Work in hand Safety – AIR People

Staff turnover

Performance This has been a transitional year for our North America business with the start of a portfolio shift towards larger projects and programmes. During the year we were delighted to be appointed to Project NEON for Nevada Department of Transportation (DOT) and the Purple Line light rail project in Maryland, both significant wins for the region. Revenue has risen to £362.6m (2015: £341.4m), at a margin of 5.6% (2015: 5.9%), which reflects significant bidding activity in support of these major project opportunities.

Business model We aim to help address the complex challenges of North America’s ageing infrastructure by partnering with our clients to deliver flexible solutions that answer both present and future needs. Our consultancy operating model consists of client-focused businesses supported by a technical professional organisation (TPO) to ensure the right people are assigned to the work quickly and efficiently, irrespective of staff location. In addition, our Faithful+Gould and Energy businesses share administrative resources and office space wherever feasible. The TPO is focused on recruiting, retaining, developing and deploying world class technical professionals. This supports our objective of providing new and innovative technical and business solutions to our clients, resulting in broader, deeper client relationships and the opportunity to work on their largest and most complex projects.

WS Atkins plc Annual Report 2016

Our ongoing operational excellence programme aims to centralise, simplify and streamline key shared services functions to deliver structural cost reductions in the medium term.

Strategy Growth is targeted by concentrating on excellent project delivery and client service, expanding our services and focusing on securing larger, longer-term projects. We have already seen an increase in both our win rate and the average size contract secured. Our focus is shifting to major infrastructure projects and programmes in our core markets and strengthening our capability to compete by drawing on resources from across the business and leveraging the Group’s worldwide capabilities.

Business drivers The majority of North America’s projects are government funded, in part or in whole, either through a state or local government or directly by federal agencies. Publicly funded projects provide greater stability although they tend to be awarded more slowly and are at greater risk of being delayed due to changing priorities or political scrutiny. Indeed, the current political climate in the US, along with federal budgetary challenges, has caused spending delays. However, the need for significant upgrading of ageing infrastructure remains a pressing issue.

Operations Our DOT business continues to improve and has grown revenue 12% year on year, particularly with key clients such as the Colorado, Florida, Texas and Georgia DOTs. In October 2015, we won the $45m design contract for Project NEON, the widening of I-15 for the Nevada DOT, as part of the Kiewit Infrastructure West team and are now in full production. Public and private is focused on the water, environmental, city and county markets and was impacted during the year by delays in project task awards. Work to reshape and position this business for more substantial and sustainable growth built around larger, longer-term projects is ongoing. In the key focus area of major programme management, there were notable wins during the year for Miami-Dade County and Broward County Schools in Florida and Cobb County in Georgia. The federal market continues to face political uncertainty and budget restrictions ahead of the presidential election, as well as challenges from global economic uncertainty. Task order assignments are being pursued under existing contracts with the Federal Emergency Management Agency, the Army Corps of Engineers and the National Guard. We are also working with other parts of the Group to target federal Government contracts outside North America.

27

Revenue £m

Operating profit £m

Staff numbers at 31 March

£362.6m

£20.4m

2,747

16 15 14

16

362.6

15

341.4

14

380.9

+6.2%

20.4

16

2,747

20.0

15

2,735

19.1

+2.0%

14

2,836

+0.4%

STRATEGIC REPORT

Strategic Report > Segmental performance – North America

Revenue by client type %

Revenue by sector % 48 Roads 12 Water and environment

55 Public sector: local government 6 Public sector: national government

8 Aerospace and aviation

2 Regulated

7 Defence and security

37 Private sector

5 Industrial 4 Buildings

Faithful+Gould has delivered an improved year on year performance. Its aviation projects include work at San Francisco, Denver and San Diego airports and for United Airlines. The appointment to provide programme management services on John Wayne Airport’s five-year capital improvement programme continues our longstanding work there. In the energy sector, additional work was secured with Bruce Power and work continues with Ontario Power Generation and BP as well as with PacifiCorp on electricity transmission. Other appointments include new projects in the hospitality and manufacturing sectors.

Closing staff numbers rose slightly to 2,747. Focus remains on attracting and retaining key staff, which has been a priority as competition for resources remains keen. Staff turnover increased to 14.3% from 10.7% reflecting these improved labour market conditions. We measure employee engagement through our Group wide Viewpoint employee opinion survey and are working with an employee focus group to address areas that it highlighted. The overall score in 2015 improved five points and is well ahead of industry norms.

programmes and funding. We are closely monitoring Congress’s activities for continued programme funding, particularly around transportation and highways, where delays would have the most significant impact on our workload. Congress’s support of federal funding for military and civilian programmes is also of particular concern in North America, as we hold a number of task order based contracts. For more information about risks across all of our businesses and the actions that we are taking, see the Principal risks and uncertainties section (page 36).

Outlook

We are committed to recruiting, retaining, developing, and elevating minority and women professionals through initiatives such as our sponsorship of WTS International. Founded in 1977, WTS has a specific mission of fostering lifelong career goals for women in the transportation industry.

Our secured work in hand in North America is 49.1% (2015: 61.6%). This figure excludes the recent Purple Line project award which, if included, would increase the level to 60.1%. Together with our Project NEON workloads, this gives us confidence for the year ahead.

Safety and sustainability

We see stable market conditions ahead, while federal funding remains uncertain. The agreement reached on a five-year Transportation Bill should provide greater pipeline visibility, although no material impact is expected until after the forthcoming presidential election. Looking forward, the benefits from our simplified organisational structure are expected to deliver improved efficiency and we believe this, coupled with volume growth, will drive margin improvement.

Our safety culture plays a central role in how we deliver work. Sustainability and employee wellbeing continued to be an area of focus. While there was a slight deterioration in the AIR for North America this arose as a result of reduced office-based staff numbers in our Faithful+Gould business in the region.

Risks A majority of our work is government funded and, as a result, political uncertainty and deadlock caused by the 2016 presidential election may lead to delays in federal

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

In aviation, where architectural and engineering services are provided at major airports including New Orleans, Los Angeles, Orlando, Nashville and Atlanta, performance improved during the year.

People

INVESTOR INFORMATION

Our strategic ventures business has a diverse portfolio of rail, transit and municipal clients for whom we provide environmental, planning, permitting, programme management, asset management and engineering services. In February, we were delighted to be selected as part of the Purple Line Transit Partners team for the $100m lead design contract on the Purple Line project for Maryland DOT. Work has started on the project, which is scheduled to complete in 2022. This represents the business’s largest single project award since joining the Atkins Group in 2010.

GOVERNANCE

2 Rail (including mass transit) 14 Other

28

Segmental performance Middle East A very good year driven by peak delivery on metro projects Key performance indicators

2016

2015

Change

£248.3m

£216.7m

+14.6%

Financial metrics Revenue Operating profit

£29.5m

£22.5m

+31.1%

Operating margin

11.9%

10.4%

+1.5pp

Work in hand

48.0%

74.2%

-26.2pp

39

36

+3

2,459

2,668

-7.8%

2,580

2,421

+6.6%

10.7%

16.1%

-5.4pp

Safety – AIR People Staff numbers at 31 March Average staff numbers for the year Staff turnover

Performance

Strategy

Business drivers

Our Middle East business delivered very good overall performance this financial year with revenue up 14.6% to £248.3m and operating profit up 31.1% on last year, driven by the Central Planning Office (CPO) project in Qatar and peak delivery on our metro projects. Operating margin improved to 11.9%. However, cash flow was not without its challenges in a region coming under increased liquidity pressure as a result of the depressed oil price.

In the Middle East, we focus on transportation infrastructure and property in the UAE, Qatar and the KSA, which we believe to be the region's more robust markets and sectors. The region offers good opportunities linked to the drive for economic diversification and the need to invest in social infrastructure. Our strategy is aimed at carefully selecting and securing critical, complex projects and programmes with established key clients who need a long-term partner. In addition, local resources support our energy business in the region, which is reported within our Energy segment.

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.

Business model Our business model is to maintain strong local resources in our chosen markets, working with our clients to deliver the complex projects that create and support sustainable, people-centric urban environments across the Middle East. We complement this with multi-skilled design centres 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. In April 2016, we brought together our rail and infrastructure capabilities into one market-facing division.

WS Atkins plc Annual Report 2016

In March 2016, we were pleased to announce our agreement to acquire Howard Humphreys (East Africa), a 200 strong multidisciplinary consultancy based in Kenya and Tanzania, providing an important catalyst to develop our presence across East Africa’s rapidly growing infrastructure market.

The prolonged low oil price, in particular, has caused client decision-making to slow, with increased uncertainty around the award of projects. While we believe the longer-term need to invest in strategically important infrastructure that supports economic growth and diversification will continue to drive demand for our services, project timing and scope are increasingly subject to review.

29

Revenue £m

Operating profit £m

Staff numbers at 31 March

£248.3m

£29.5m

2,459

168.4

16

29.5

15 14

22.5 14.4

16

2,459

15 14

2,668 2,071

+14.6%

+31.1%

-7.8%

Operations

major transport infrastructure programmes. We continue to work on a significant framework to upgrade Doha’s roads and drainage system.

We measure staff engagement through our Group wide Viewpoint employee opinion survey. Our overall engagement score for the Middle East improved by six percentage points year on year, putting us 10 points above the benchmark for our industry sector. This is reinforced by the large proportion of people who indicated in the survey that they are proud to work for Atkins and that they care about our success.

Our business performed well in the first half and built on this in the second half to deliver another very good full year performance, further reinforcing our position among the Middle East’s leading design, engineering and project management consultancies. Delivery continues on the design of our major metro projects, including Riyadh Metro and Doha Metro, positioning us well for any future metro opportunities in the region. Property sector activity in the UAE remains focused primarily on expanding Dubai’s offering to visitors and residents, especially where linked to the hosting of Expo 2020. Our current projects include the Dubai Opera, which is scheduled to open later in 2016. We also secured the design and supervision of a 95,000 m² extension to a Dubai shopping mall for a large retail development client, while in Abu Dhabi we have been awarded the design of a new residential community for up to 16,000 people. In Qatar, we are working with the Government towards meeting its National Vision 2030. Our role on the CPO has been completed, with the success of our advisory work having made an important contribution to the coordination of Qatar’s

In addition to our metro work in KSA, during the year we successfully supported strategic programmes to drive the Kingdom’s long-term economic growth and diversification. The need to prioritise and manage infrastructure investment is leading to advisory services opportunities with public sector clients. Our Faithful+Gould business in the Middle East has had another good year with growth across the UAE and KSA. In the UAE, our focus is on the property sector, with recent appointments for a large mixed use development in Abu Dhabi and as programme manager for Emaar on the Dubai Creek Harbour project. We have also been appointed as project manager on a 100 bed hospital in Dubai. In KSA, we continue to work in conjunction with our Energy colleagues to explore wider opportunities under a new five-year framework agreement with a key client.

People Headcount fell to 2,459 (2015: 2,668), reflecting the downsizing of our property and infrastructure teams, completion of our work on the CPO and as delays to project awards continued. Staff turnover decreased to 10.7% (2015: 16.1%) across the region.

During the course of the year, the Middle East women’s professional network continued its engagement internally and is progressively becoming more recognised externally within the region. In addition to providing development opportunities and coaching and mentoring activities to our female employees, we want to attract the best talent in the region and be the employer of choice. We continue to invest in the most important capabilities and behaviours required to deliver our major projects successfully.

Safety and sustainability

GOVERNANCE

14

216.7

FINANCIAL STATEMENTS

248.3

15

The slight deterioration in our AIR was driven by the reduction in headcount, the number of major accidents was unchanged. We have continued to encourage higher standards of health and safety, presenting Atkins minimum requirements and working with Qatar’s Ministry of Municipality and Urban Planning to improve and standardise accommodation for the local work force.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

16

STRATEGIC REPORT

Strategic Report > Segmental performance – Middle East

30

Segmental performance – Middle East continued

Revenue by sector %

Revenue by client type %

2 Public sector: local government

Revenue by geography %

39 Rail (including mass transit) 20 Urban development

22 Public sector: national government

43 Qatar 24 Kingdom of Saudi Arabia

11 Roads

76 Private sector

19 Dubai

9 Buildings

9 Abu Dhabi

7 Tourism and leisure

3 Sultanate of Oman

14 Other

2 Other

Risks 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 in which we operate and our clients, helps us to mitigate political and commercial risks. Further uncertainty around the oil price presents a key risk because of the impact on government spending and the knock on effect on private sector confidence. Our focus on strategically important projects and programmes gives us some insulation from short-term changes, which partially mitigates this risk.

WS Atkins plc Annual Report 2016

Construction safety remains an elevated risk in the Middle East. We are mitigating this wherever possible and have been instrumental in creating improved standards for the industry through initiatives such as the Atkins minimum requirements. More detail on the risks that our businesses face can be found in the Principal risks and uncertainties section (page 36).

Outlook Our order book stands at 48.0% of next year’s budgeted revenue (2015: 74.2%), with the annual reduction reflecting prior year awards of major contracts and the significant challenges faced by the region due to the low oil price. While long-term major project opportunities continue to come to the market, contract awards in the Middle East are expected to remain slow. We are cautious about the outlook for the region, given increased uncertainty on the timing and funding of our pipeline opportunities,

particularly in property and infrastructure. Our advisory services team, which now exist within our Atkins Acuity business, are developing plans to participate more actively in the new framework opportunities developed by Faithful+Gould and Energy, where we see good potential for infrastructure support. Activity is now underway to establish the new transport and infrastructure division's strategy and structure in order to respond fully to the needs of clients more effectively and efficiently. The primary focus will be on our core Middle East markets and Africa. The acquisition of Howard Humphreys (East Africa) gives us an excellent platform to develop our presence in Africa, where major investment in transportation, infrastructure and energy is creating demand for multidisciplinary design and consultancy services. We will continue to explore other opportunities to increase our regional footprint.

Strategic Report > Segmental performance – Asia Pacific

31

Segmental performance Positioning for long-term growth Key performance indicators

2016

2015

Change

£106.1m

£109.7m

-3.3%

£8.5m

£9.8m

-13.3%

8.0%

8.9%

-0.9pp

46.1%

49.2%

-3.1pp

209

77

+132

1,354

1,523

-11.1%

Financial metrics Revenue Operating profit Operating margin Work in hand Safety – AIR

STRATEGIC REPORT

Asia Pacific

Staff turnover

Performance In our Asia Pacific region operating margin was 8.0% on revenue of £106.1m (2015: £109.7m). Our profitability and cash flow performance were impacted by delays to the start of a number of key opportunities and cash receipts from clients beyond agreed contract terms.

Business model We operate predominantly in Hong Kong and mainland China supplemented by a network of offices across Malaysia, Vietnam, Singapore, India and Australia. Using our local knowledge combined with our skills and experience in delivering complex projects around the world, we offer our clients a range of services throughout the entire cycle of urban development. We work in partnership with chosen Chinese contractors and support them both within the region and further afield. Our regional capability in project management has been strengthened, helped by the 2013 acquisition of Confluence, and we draw upon our Group wide expertise to deliver the most technically suitable solutions to our clients.

Strategy Our strategy of geographic diversification has a focus on urban planning, transport infrastructure and property. Our relationships with Chinese contractors seeking to grow and invest outside their domestic market are progressing. Our presence in the southeast Asian markets is being developed. In Hong Kong, our client base is diversifying and our relationships with internationally renowned contractors is

being strengthened through our design and build projects. In mainland China, property market conditions have led to the restructuring and right sizing of our teams. In 2016, architecture, landscape, and urban planning and consultancy were consolidated into a new property business designed to increase operational efficiency and allow a multidisciplinary approach to chosen clients. We will increasingly target state owned enterprises and larger developers who have the financial capability to take major projects forward. Opportunities to expand our Atkins Acuity business across the region, but particularly in southeast Asia, are increasing as strategic partnerships are formed with engineering companies and contractors to secure higher value opportunities.

Business drivers Our growth potential in the region is underpinned by the scale of urbanisation driving both government spending and the rate of private sector investment. Outside Asia Pacific, good business opportunities exist for the Group as a whole as major Chinese companies invest in large scale infrastructure development projects outside their domestic market.

Operations In Hong Kong, the largest part of our Asia Pacific business, the political situation appears to be stabilising following the antiGovernment protests of late 2014. We have continued to bid for major new government contracts but are closely monitoring a slowdown in the rate of funding approval and increased competition.

1,448

1,561

-7.2%

18.7%

12.2%

+6.5pp

We see progress in diversifying our service offering to our major clients. We have won a design consultancy contract for Hong Kong International Airport for advance modification works on the airport taxiway network to facilitate future aircraft movements during the initial construction phase of the new third runway. Our Hong Kong office is increasing its exploration of outbound projects including opportunities in Indonesia and Vietnam. We are providing the transit oriented development masterplan along the new Jakarta-Bandung high speed rail corridor, Indonesia's first high speed rail project. In mainland China, the property market slowdown has continued and opportunities for our property team to work together with local design institutes are being investigated. In mainland China, while we welcome the Government programme of anti-corruption measures it continues to slow down the release and award of projects which is impacting our workloads and has led to resource adjustments. We were appointed recently to provide support to Prasarana in a client advisory role on the delivery of its LRT3 light railway project in Kuala Lumpur, Malaysia. Our overseas work with Chinese contractors includes support to China Merchant and Djibouti Ports and Free Zones Authority on a feasibility study for a port oriented free trade zone investment in Djibouti, where the downstream masterplan work was secured. Work with China Communications Construction Company and its subsidiaries on a number of outbound opportunities in the UK, Asia,

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

Average staff numbers for the year

INVESTOR INFORMATION

Staff numbers at 31 March

GOVERNANCE

People

32

Segmental performance – Asia Pacific continued Revenue £m

Operating profit £m

Staff numbers at 31 March

£106.1m

£8.5m

1,354

16 15 14

106.1 109.7 100.5

16

14

16

8.5

15

9.8 8.0

1,354

15

1,523

14

1,498

-3.3%

-13.3%

-11.1%

Revenue by sector %

Revenue by client type %

Revenue by geography %

26 Buildings 16 Rail (including mass transit)

16 Public sector: local government 10 Public sector: national government

45 Hong Kong 29 Mainland China

11 Urban development

74 Private sector

10 Singapore

10 Water and environment

3 Australia

10 Tourism and leisure

3 Vietnam

27 Other

10 Other

Africa and the Middle East is ongoing. We are supporting a number of contractors in Africa and the UK to assist in securing construction contracts and investment prospects in the transport, property and energy sectors.

In November 2015, the Asia Pacific women’s professional network was launched with the mandate to promote gender diversity in the workplace and engage and encourage female staff in their professional development.

In southeast Asia, two new city development contracts were secured with Vingroup and Sands Corporation has appointed us as lead consultant for projects at Marina Bay Sands in Singapore.

Our employment approach has helped attract and retain female employees and they now account for 38% of the overall headcount. Over 37% of all our new hires for graduate engineer positions, outside Faithful+Gould, were women. In our global design centres (GDC), 23% (2015: 20%) of the workforce and 16% of our overall graduate engineers hired are female.

Our Faithful+Gould business had another good year, with its role as engineering project manager on the Formula 1 Singapore Grand Prix and a strong pharmaceutical and manufacturing sector workload. Recent wins include a large scale retail development in Malaysia, luxury retail stores in Macau and premium brand hotel projects in Singapore and India. While economic growth has slowed in China, we continue to see opportunities in the manufacturing and hospitality sectors.

People Overall headcount in our Asia Pacific region decreased in the year to 1,354 (2015: 1,532) primarily as a result of actions taken to restructure and resize our team in mainland China. Staff turnover has increased to 18.7% (2015: 12.2%).

WS Atkins plc Annual Report 2016

Safety and sustainability AIR has increased in Asia Pacific partly reflecting three reportable accidents compared with two last year.

Risks During the financial year, the welcome anti-corruption measures introduced previously in mainland China resulted in increased risk for our business as contract awards were delayed. We continue to monitor developments closely and to take appropriate action regarding resourcing.

Expanding our footprint across the region brings increased risks such as lack of commercial transparency, political instability and risks associated with operating within unfamiliar regulatory, tax and employment regimes. We undertake research into both the market and specific clients, as well as using professional advisors to assist with legal and regulatory compliance. We discuss risks in more detail in the Principal risks and uncertainties section (page 36).

Outlook Our order book stands at 46.1% of next year’s budgeted revenue (2015: 49.2%). The political situation in Hong Kong is stabilising, however delayed approval of funding continues to impact our pipeline of work. The slowdown in mainland China is expected to continue and our aim is to improve operational efficiency with the formation of the new property division. We see increasing opportunities for Atkins Acuity to provide advisory work in the region.

Strategic Report > Segmental performance – Energy

33

Segmental performance A mixed year with continued challenges for oil and gas Key performance indicators

2016

2015

Change

£201.3m

£182.0m

+10.6%

£16.7m

£20.4m

-18.1%

8.3%

11.2%

-2.9pp

30.5%

29.8%

+0.7pp

55

63

-8

Staff numbers at 31 March

1,806

1,813

-0.4%

Average staff numbers for the year

1,840

1,633

+12.7%

Staff turnover

8.8%

8.6%

+0.2pp

Financial metrics Revenue Operating profit Operating margin Work in hand Safety – AIR

STRATEGIC REPORT

Energy

Our Energy business has had a mixed year. Our nuclear, power and renewables businesses delivered a good performance while most of our oil and gas markets, except the Middle East, faced challenges. Revenue rose to £201.3m (2015: £182.0m) due in part to the benefit of acquisitions in the second half of last year. However, both operating profit at £16.7m and margin at 8.3% reduced, reflecting continued pricing pressure and the impact of the deferral and cancellation of some projects in the oil and gas market.

Following the completion of the acquisition of the projects, products and technology (PP&T) segment of EnergySolutions nearly 70% of Energy’s revenues will come from the nuclear industry reflecting our confidence in the growth opportunities in this area. We also foresee an increasing contribution to our business from renewables projects. The oil and gas industry may need to accept a lower price environment for the foreseeable future and we are actively adjusting our business model accordingly. Nevertheless, we are confident that hydrocarbons will remain part of the global energy mix in the long term.

Business model The Energy business operates worldwide competing against a wide range of businesses, from large multinational engineering consultancies to specialist niche players. Focus remains 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 safety, integrity and economic performance of our clients’ facilities.

We continue to look at selective investment opportunities to expand 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 continued global growth in energy requirements as many countries seek to balance increasing demand with a desire to decarbonise in order to mitigate the effects of climate change.

countries are looking to develop nuclear power as part of their long-term strategy for more secure, low carbon energy. Our skills are in high demand across the entire nuclear lifecycle. In oil and gas, we see a similar focus on keeping existing production and distribution facilities operating safely for longer, drawing on our safety and integrity services. The oil and gas industry needs to reduce operating costs further as a consequence of the low oil price and this is driving demand for our advanced engineering skills and lifecycle expertise.

Operations Nuclear We have a robust, broad-based nuclear portfolio that is performing well. In the UK, our position in the nuclear new build market remains strong. In line with our strategy, engineering and related technical services are provided to EDF Energy, Horizon Nuclear Power and NuGen for a new generation of nuclear power stations in the UK. We have recently finished our commission for the UK Government on the techno-economic assessment and are positioning to take a leading role as engineering partner for the future development of small modular reactors.

In nuclear and conventional power the need to keep existing generation and distribution facilities operating safely for longer remains. There is a continuing requirement for technical support around nuclear decommissioning. A number of

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

Strategy

INVESTOR INFORMATION

Performance

GOVERNANCE

People

34

Segmental performance – Energy continued Revenue £m

Operating profit £m

Staff numbers at 31 March

£201.3m

£16.7m

1,806

16

201.3

15 14

182.0 169.6

+10.6%

16

16.7

15 14

20.4 15.1

-18.1%

Revenue by sector %

16

1,806

15

1,813

14

1,461

-0.4% Revenue by client type %

47 Nuclear 36 Oil and gas

15 Public sector: national government

2 Public sector: local government

17 Power (including renewables)

29 Regulated 54 Private sector

Following the successful conclusion of termination negotiations and the demobilisation of the Silos Directencapsulation Plant project, additional decommissioning work at Sellafield was secured. Our joint venture with AREVA and Doosan has been appointed to Sellafield’s decommissioning delivery partnership under a framework agreement which is expected to run for 10 years and involves decommissioning and maintenance work on a broad range of facilities. We are busy on existing nuclear generation and life extension work through our role as an EDF Energy UK Strategic Supply Chain Partner. We see significant opportunities in North America and other markets outside the UK and continue to expand the international portfolio of our nuclear business. A broad range of services are provided to the Emirates Nuclear Energy Corporation in the Middle East on the £20bn Barakah New Nuclear Programme and to the €15bn International Thermonuclear Experimental Reactor programme in the south of France. Our international footprint in nuclear was significantly enhanced in April 2016 when, following US Government regulatory clearance, we completed our acquisition of PP&T which designs solutions for the treatment and stabilisation of high, intermediate and low level nuclear waste. This positions us well across all tiers of the international decommissioning and waste management market.

WS Atkins plc Annual Report 2016

Oil and gas The performance of our oil and gas business continues to be mixed.

of a five-year framework, covering project management services for major pipelines and a wide range of projects.

A further deterioration in trading conditions, particularly in our North American business, was offset to some extent by growth in the Middle East. In the UK, we continue to see focus on keeping existing production and distribution facilities operating safely for longer, which is drawing on our safety and integrity services. In line with the industry as a whole, we remain cautious and continue to monitor productivity closely, while delivering both consultancy and design services under our long-term framework agreements with major international oil and gas operators.

Our portfolio of work in the international liquefied natural gas (LNG) market is expanding. Building on our ongoing relationship with Shell, we were appointed to develop asset integrity models for future inspection and maintenance of its Prelude FLNG project, the largest floating LNG project in the world. Work on the INPEXoperated Ichthys LNG project is ongoing and we act as technical advisor and engineering designers on Singapore’s LNG terminal as part of a five-year engineering services agreement.

Our Middle East oil and gas business has doubled in size during the year and is seeking to establish a new joint venture in KSA. Further expansion has been achieved in the UAE and Qatar with design and consultancy services for ADNOC and Qatar Petroleum. Our relationship with Shanghai Electric Power to deliver projects to Aramco has been extended to include the design of a third gas compressor booster station, as well as securing the design of a major pipeline project with Saudi Kad. Working in collaboration with our Faithful+Gould colleagues, a major contract has been secured with a key client in KSA to support the execution of capital projects as part

Power Our power division had a very strong year, trading above our expectations. Our renewables business has further strengthened its position in the UK offshore wind market. We are currently one of the largest suppliers of engineering work in this market and are at the forefront of driving innovative design for floating offshore wind to maximise energy yield for clients in this fast-moving sector. In February 2016, the Swedish company Hexicon appointed us as engineering partner for its innovative multiturbine offshore wind floating platform to be deployed off the north coast of Scotland.

Our presence in the Middle East has been increased with the award by Hyundai Engineering and Construction to provide engineering design services for the Abu Dhabi Water & Electricity Authority Mirfa independent water and power project. We have also been appointed to support the design and implementation of Dubai Airport’s energy management programme. As well as building our pipeline in the Middle East, our role supporting China Light and Power in Hong Kong is expanding as it looks at options to extend the life of its generating assets.

People Headcount decreased slightly to 1,806 (2015: 1,813), with the reduced workload in our UK and US oil and gas businesses being offset by organic growth of our nuclear, power and Middle East oil and gas businesses. Staff turnover has remained steady at 8.8% (2015: 8.6%). We measure employee engagement through our Group wide Viewpoint employee opinion survey. Our overall engagement score for Energy remains significantly better than the benchmark for our industry sector. Our popular Energising Your Career course supports the development of our mid-career staff by helping employees to consider their future career development in

We will work to increase the proportion of female employees and offer a range of flexible working options to help us both recruit and retain staff. We implemented a programme to support women returning to work after maternity leave in 2015 which has now been extended to other UK-based female employees.

For more information on the risks that our businesses face and the actions we are taking see the Principal risks and uncertainties section (page 36).

Safety and sustainability The improvement in the AIR result is due to the increase in headcount during the year with no decrease in reportable accidents. We are helping society to make the transition to a low carbon economy through our work on a wide range of low carbon enabling technologies such as nuclear, offshore wind, tidal, carbon capture and storage, and biomass. We also help to ensure that extraction of the world’s remaining oil and gas reserves respects both life and the wider environment.

Risks Continuing deterioration of the oil price is a key risk for Energy. During the year mitigating action was taken by reducing headcount and our overall cost base. We continue to address productivity and rebalance the business to meet demand. The safety, environmental and reputational consequences of an error in our work, given the high hazard nature of the facilities on which we work, is another key risk.

Outlook Our secured work in hand is 30.5% (2015: 29.8%) of next year’s budgeted revenue, which excludes PP&T’s work in hand. The outlook for our Energy business overall remains positive, with the fundamental drivers for growth unchanged as the world’s requirement for energy continues to increase. We continue to seek ways to grow the business organically, while also exploring further acquisition opportunities. Despite difficult trading conditions in the oil and gas market, we believe we are well positioned for the medium and longer term. We are adapting to a more cost conscious oil and gas market and are seeking further opportunities to leverage our skills in LNG and floating structures. We see significant opportunity for growth in nuclear across new build, maintenance and decommissioning supported by our acquisition of PP&T with its proven track record in the management of Tier 1 nuclear licensed sites. The outlook for power is positive and we will continue to internationalise the business while expanding our renewable energy portfolio.

As with any acquisition, there is the potential risk of failure to integrate the acquired PP&T business into Atkins which could lead to a loss of shareholder value with expected benefits and synergies not achieved. This risk is mitigated by thorough due diligence ahead of acquisition, a detailed integration plan compiled in conjunction with the acquired business and well resourced implementation plan, with progress against the plan fed back regularly to the Board.

GOVERNANCE

In November 2015, Stoke-on-Trent City Council appointed us as primary project consultant to deliver a ground-breaking new low carbon district heating network for the city.

continue to invest in our in-house training academy that now provides externally recognised courses. This year over 300 people were welcomed onto these courses.

FINANCIAL STATEMENTS

We were involved as an official advisor to DECC for their energy storage competition programme which supported UK businesses to develop and demonstrate innovative energy storage technologies.

an informed manner; 130 staff have now attended. During the year it was adopted into the Group’s corporate curriculum for use by the wider business.

INVESTOR INFORMATION

In 2015, Seaway Heavy Lifting appointed us to design the jacket foundations for the 664MW Beatrice offshore wind farm. We are also designing eight offshore substation platforms across four of DONG Energy’s proposed offshore wind farms. Statoil named us as one of three winning companies of the Hywind Installation Challenge innovation campaign for the design of a novel assembly and installation concept for floating structures.

35

STRATEGIC REPORT

Strategic Report > Segmental performance – Energy

Our plans for growth are potentially affected by the availability of skills in the right locations. To mitigate this risk we

WS Atkins plc Annual Report 2016

36

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

Board The Board reviews the Group operational and strategic risk registers at least quarterly. It delegates authority for the service delivery process and risk management process to senior management.

Audit and Group Risk Committees The Group Risk Committee, chaired by the Group CEO, oversees the operation of the Group’s risk management framework and provides support to the Board and the Audit Committee. It reviews the Group operational and strategic risk registers regularly.

Group commercial and risk management director Consolidates the risks submitted by functional areas and businesses to compile the Group’s key risks. Operational risk logs are updated monthly and strategic risk logs quarterly.

Senior management of Group functional areas identifies the key risks and develops mitigation actions.

Effective risk management is embedded in our governance framework, which is summarised in the Corporate governance report (page 61). Our risk management framework supports the Board in governing, reviewing, 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, allow us to identify consistently, assess, prioritise,

WS Atkins plc Annual Report 2016

Senior management of each operational business sector and divisions identifies the top risks and develops mitigation actions.

manage and report risks of both a strategic and operational nature. Our strategic and operational risk registers allow us to assign owners and mitigation strategies to identified risks. Ownership is not the exclusive responsibility of senior management but is passed down to appropriate staff members. The registers are routinely reviewed by the Group Risk Committee. It also receives presentations from selected risk owners to provide a more detailed explanation of the risk, including the effectiveness of associated

mitigation measures, controls and key actions that are required to manage it. We also assess all potential project opportunities using an online service delivery process which includes a risk categorisation tool that scores and ranks these opportunities using a traffic light system. This determines the risk profile and is the initial factor that informs the required level of review of each opportunity as it progresses through the Group’s ‘stage gate’ bid approval process. This process,

37

The table outlines the principal risks, the mitigating activities undertaken in respect of each of them and indicates the direction of change of each in the year. We continue to assess these risks under two main categories: strategic and operational.

Risk appetite The Group's risk appetite is determined by the risk framework, reinforced by specific risk management processes and approval. The Group seeks to reduce the potential impact of the risks by regular monitoring and review in order to meet strategic and operational obligations and objectives. There are a number of principal risks identified which are inherent to the Group and also to other organisations in our sector. We have processes and procedures within the risk framework which assist in the control and mitigation of each specific risk to minimise the probability of the risk occurring and/or minimise the residual impact in the event the risk occurs. These risks are regularly reviewed, challenged, prioritised

and monitored by senior management, the Audit and Group Risk Committees and the Board to determine the overall risk profile both qualitatively and quantitatively. This process enables the residual risk to be assessed and the risk appetite of the Group to be determined. The Group has carried out a comprehensive review and assessment of each principal risk in the organisation of which there are currently twelve. To assist with the monitoring and management of the principal risk, further work has been undertaken in the Group to establish and consider the specific risk appetite for each principal risk. The overall nature of these risks has generally remained unchanged over the year. The principal risks are set out overleaf.

Viability statement Assessment of prospects

Assessment of viability

The Group considers the development of the business and the industry in which it operates over many time horizons. The broader macro trends are assessed for their impact in the longer term and the implications for the business are evaluated. The Group’s strategic plan, which covers the current and following four years, is reviewed by the Directors annually.

In assessing the Group’s viability, the Directors have carried out a robust assessment of the principal risks in the business. Appropriate, plausible scenarios have been considered, including the associated potential impacts on the Group’s profit and loss, balance sheet, cash flows, and key performance indicators over the period. It has been assumed that funding in the form of capital markets debt or bank debt would be available in all reasonable scenarios contemplated and that mitigating actions could be implemented as required to improve the position in the most severe scenarios.

The contracts into which the Group enters are characterised by multiple timeframes, many of which are short-term in nature. Consultancy and design work is often of a duration of less than one year and there are a limited number of contracts or frameworks of multiple year duration within the Group’s portfolio. While there may be a reasonable expectation of securing work beyond that within the visible pipeline, there are a number of uncertainties arising in consideration of longer time periods. Consequently, there is a greater degree of certainty in the early years of the Group’s strategic plan.

Confirmation In the context of the inherent uncertainties of a multiple year period of evaluation, the Directors confirm that based on this analysis there is a reasonable expectation of the Group continuing in operation and meeting its liabilities as they fall due in the period to March 2019.

Based on the increased confidence provided by the Group’s current contract portfolio over the shorter term, and the market and industry uncertainties in the outer years, the Directors have assessed the Group’s viability over a three-year period to March 2019.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

We continue to manage a number of potential risks and uncertainties which could have a material impact on our strategic and operational objectives. Many of these risks are common to other companies and we assess them regularly to establish the principal risks and uncertainties for the Group.

Where applicable, we cross-reference principal risks with segment-specific risks.

INVESTOR INFORMATION

combined with the risk management framework together with the long established internal delegated authority structure, is applied across the Group and is designed to achieve progressive improvement in the quality and rigour of our bidding and project delivery processes.

GOVERNANCE

STRATEGIC REPORT

Strategic Report > Principal risks and uncertainties

38

Principal risks and uncertainties continued Strategic Risk (in alphabetical order) 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 capital spend and have an adverse impact on our clients’ ability to pay for our services.

Mitigation

Activities in the year ended 31 March 2016

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.

During the year we continued to increase the utilisation of our Indian GDCs, increasing staff numbers across our two sites (Delhi and Bangalore).

We will undertake careful and selected regional expansion, exploring the potential in North America, southeast Asia and Africa. We will continue to focus the Group on higher growth, higher margin activities. To provide increased flexibility and remain competitive, we utilise our global design centres (GDCs) in India to support market opportunities and projects across the regions in which we operate. We seek to redeploy our people around the Group to meet demand in growth markets and sectors, frequently moving work to people and people to work to enhance Group agility and staff utilisation. We perform periodic client credit checks and maintain regular management reviews of credit terms, trade debtors and work in progress.

Financial

We review the Group’s trading and funding position on an ongoing basis.

A 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. Geopolitical Political instability in the regions within which we operate has a negative impact on our ability to deliver contractual services and receive payment, and endangers the safety of our people. Political transition leads to uncertainty or deadlock delaying government funded programmes.

Risk increasing

The Group’s treasury function manages and monitors external funding and investment requirements and risks arising from the Group’s financial instruments risks, including foreign exchange risk, interest rate risk and price risk, credit risk and liquidity risk. We have made good progress in implementing our strategy to continue to de-risk our defined benefit pension schemes.

We are focused on geographies that have more stable trading markets and environments with regional growth resulting from economic diversity, population growth and urbanisation. We monitor closely our operating geographies and markets to identify geopolitical change that could potentially have an impact on the trading conditions for our operating business. We obtain the latest professional risk and security information provided by external organisations before engaging in contracts in new geographies and we monitor regularly the economic stability and the security of the markets in which we continue to trade. The operational leadership team and senior management review periodically geopolitical influences that have the potential to affect the economic and safety environment in our operating geographies and markets.

Risk decreasing

WS Atkins plc Annual Report 2016

No material change to risk

During the year, we negotiated a new £100m, three year revolving credit facility (RCF) with our tier one relationship banks. This new facility is in addition to the Group’s existing £200m five-year RCF and $75m US Private Placement debt, with maturity dates of 2021 and 2019 respectively. During the year we have agreed a long-term, de-risking investment strategy for the Group's principal pension plan. Further information is contained in the UK and Europe review (page 22). During the year we continued to develop the security and safety standard for our staff when working in low, medium and high risk geographies.

Change in year

We have robust, integrated online service delivery review processes, which include risk classification, peer reviews and Group authority approvals during the key stages of bidding work, entering into contracts and during delivery of our projects. We continue to embed our integrated online service delivery process across the Group. We continue to focus our strategy on sectors with strong sustainable growth prospects, good levels of funding and higher technical barriers to entry.

Reductions in the amount of available work through client delays or cancellations, together with reduced win rates from increased competition, result in insufficient work for our people.

We have a strategic focus on operational excellence and, through a series of initiatives together with the increasing use of our GDCs in India, we aim to deliver a competitive cost base while also supporting and enabling growth across the Group.

Regulatory/Legal

We seek external advice about new and/or changing trading restrictions, communicating these changes across our business as necessary.

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 reputational damage.

We carry out our annual review of our online service delivery process to ensure it continues to provide a robust standard for winning, delivering and reducing contract and commercial risk across the Group.

We operate a Group trading standard and associated country approval list, detailing the approved procedure for trading worldwide. The country approval list details the risk profile for countries around the world across matters including trade restrictions, corruption and travel security, which determine the level of approval required to trade there. All overseas projects and those that carry elevated risk on the project risk categorisation tool are automatically screened by Group compliance to confirm legal compliance and assess project risk in line with the approved procedure. We continue to invest in training and communication in the area of compliance. We have a whistleblower hotline that is available to all our people, suppliers, subcontractors, clients and third parties. The Group code of conduct was launched across the Group in 2015 with all our people either receiving or being provided with access to a copy. We review and update the Group's trading standard and the associated country approval list annually.

Strategic acquisition and integration Failure to integrate the acquired businesses into Atkins lead to a loss of shareholder value with expected benefits and synergies not achieved.

We have a robust acquisition process and stage gates, which include Group authority approvals during key stages of the acquisition process. We undertake thorough due diligence ahead of acquisition, jointly develop a detailed integration plan with the acquired business and implement a well-resourced implementation plan, with progress against the plan regularly monitored by the Board.

Change in year

During the year we continued to drive operational performance across the Group to improve our margins. This year we successfully implemented the online service delivery process in North America. During the year we took specific action to reduce our resources in our oil and gas business, redeploying elsewhere within the Group where possible to meet demand in other growth markets and sectors, in response to reduced demand for our services from a number of our clients as they have responded to the fall in oil prices. We reduced our resource levels in the Middle East property and infrastructure business to reflect reduced demand and delayed awards for our services in these markets.

STRATEGIC REPORT

Worsening market conditions, for example a fall in commodity prices or a shift in industry demand, lead to changes in contracts resulting in increased risk transfer from clients and a need to accept more onerous contract terms to win work.

Activities in the year ended 31 March 2016

To ensure the Group code of conduct has been read and is understood all our people have been required to complete an e-learning module during the year. During the year we carried out a planned review and update of the Group country approval list and the associated risk profile for the countries. We improved our due diligence offering by moving to new screening software to give us greater access to more databases and media sources that inform our project risk assessment. We further enhanced our ability to secure the compliance of our external partners through the introduction of third party questionnaires and policy certifications.

During the year, we continued to improve our approach to due diligence and integration planning, based on learning from previous acquisitions.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

Market

Mitigation

INVESTOR INFORMATION

Risk (in alphabetical order)

39

GOVERNANCE

Strategic Report > Principal risks and uncertainties

40

Principal risks and uncertainties continued Operational Risk (in alphabetical order)

Activities in the year ended 31 March 2016

Mitigation

Crisis event A significant one-off event affecting a key business location, project or our people 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 our people, clients or other third parties leading to injury, loss of life and/or significant damage to our reputation with all stakeholders.

We have a Group crisis management plan in place to enable us to respond quickly to such events. We carry out regular reviews of the Group’s crisis management plan and carry out tests to establish the effectiveness and adequacy. The test should include a simulated exercise of a regional crisis event that was escalated to the Group.

We have consistent safety standards worldwide and senior management leadership on health, safety and environmental matters is regularly reinforced via targeted campaigns.

A review of the Group’s crisis management plan was carried out during the year. This included a simulated exercise of a regional crisis event in the Middle East and the UK that was escalated to the Group crisis management team. During the year we rolled out the AOS system across the Middle East and North America.

Our Group wide behavioural awareness campaign, Safe and Secure by Choice, focuses on the safety behaviours of our employees, highlighting the importance of reporting all health and safety incidents. It supports our commitment to creating a leading health and safety culture and includes sections on personal safety, ability to challenge, driving and near-miss reporting. We mandate accident and near-miss reporting and provide a whistleblower hotline to enable our people, suppliers, subcontractors, clients and other third parties to raise concerns confidentially. We invest in the training of and communication to our people about the importance of safety and security in the workplace. We operate a global standard to assess the competency of construction contractors and set the minimum requirements expected on site during the supervision of the services. Atkins has implemented an online operating safely system (AOS), which includes an online risk assessment and enables employees to be tracked while working on site.

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 our people. Our business systems suffer an attack from hackers or viruses. The safety and security of our people is threatened.

We use appropriate physical security, secure networks and encryption to protect data. We train our people and provide guidance on best practice in information assurance. The Group security officer seeks to ensure best practice and continually raise the profile of security across the business. We continue to provide information assurance guidance and training across our business. We have developed a security standard (protecting our people and property) and an information assurance standard. We recognise there is an increased focus on privacy, the protection of personal data and the expectations of our clients, people and other stakeholders in this area. A Group data protection manager has been appointed to develop further our approach to data protection. We maintain certification to the UK Government’s new Cyber Essentials Plus standard.

Risk increasing

Risk decreasing

WS Atkins plc Annual Report 2016

No material change to risk

During the year, we continued to provide information assurance guidance and training across our business. Information assurance guidance and behaviour based training modules for the Group are also being developed to complement and improve the effectiveness of our controls in this area and these will be made available to all our people. During the year, we have cascaded our security standard (protecting our people and property) and an information assurance standard across the Group.

Change in year

Risk (in alphabetical order) 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.

Mitigation We have invested in the deployment of our online project management system to drive consistently high standards across the Group. Investment in ongoing project management excellence training programmes for our people, including the development of a new project management competency framework.

41

Activities in the year ended 31 March 2016

Change in year

During the year we continued to invest in increasing project management capabilities across the UK and Europe and the Middle East, in particular.

STRATEGIC REPORT

Strategic Report > Principal risks and uncertainties

Technical delivery Design errors or omissions lead to client dissatisfaction, financial losses and damage to our reputation for technical excellence.

Sector succession plans are developed, reviewed and implemented each year to ensure that we retain our best talent.

Maintenance of a detailed succession management plan A talent management pilot has been launched to focus on our high potential across the Group. people in succession management planning Regular succession planning reviews provide support across the Group. for internal mobility, development of an effective talent We implemented improvements across the pipeline and career path management. Group during the year to define and support career paths within the Group including An annual review of our staff engagement through technical, project management, business our Viewpoint survey ensures that the morale and management and business development motivation of our people is managed effectively. routes. Our robust service delivery process, and the associated stage gate review procedures during the bidding, contracting, delivery and completion stage, ensure that the Group has the capability to deliver the technical requirements within our contracts. We use seven design principles which govern all our technical work and are embedded in our business management system. Technical reviews and checking during delivery of our projects remains a key control. Our technical assurance guidance and standard is included within our business management system.

We have continued to develop our standards for project manager competence and electronic data management across all sectors during the year. We continued to cascade our technical assurance standard during the year establishing the minimum assurance requirement for our technical deliverables to our clients in the Group. We also refreshed the technical assurance guidance in our business management system.

FINANCIAL STATEMENTS

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.

Regular business reviews evaluate a number of metrics including headcount, staff turnover, vacancy levels and employee engagement.

We have implemented a programme of continual technical training and development. ’Network chairs’ lead our technical centres of excellence across the Group.

INVESTOR INFORMATION

Staff recruitment and retention

GOVERNANCE

We seek continually to improve project controls, which include regular financial and operational reviews of project performance and delivery.

We have established a working group of representatives from all our operating businesses and relevant corporate functions to develop and disseminate best practice regarding technical assurance and governance.

WS Atkins plc Annual Report 2016

42

Our people “We aim to attract the best people and continually develop their capabilities so that we can deliver outstanding solutions for our clients.” James Cullens Group HR director

Overview At Atkins, our people give us our competitive edge. We trust them to go above and beyond for the Group and our clients. Their individual talent and our collective expertise help us to exceed client expectations and meet our strategic objectives. We review our human resources metrics regularly and, as part of this process, we consider a range of measures, such as headcount, succession planning, retention rates and employee engagement. We also review progress against both our Group and sector people strategies, ensuring we are able to forecast the future skills and resourcing needs to support our growth plans.

Alignment 2015

68 2014

66

Norm

59

Alignment is about how closely an individual’s objectives, values and aspirations match those of the Group.

Involvement Overall engagement

69

2014: 68 Norm: 59

Loyalty 2015

70 2014

69

Norm

57

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.

Figure 1: Viewpoint Group engagement results as provided by Ipsos MORI

WS Atkins plc Annual Report 2016

2015

69 2014

69

Norm

62

Involvement is about how involved people feel with their job. We measure this through key questions around job satisfaction, motivation and personal fulfillment.

Strategic Report > Our people

43

Figure 2: International assignees by location

E RI

CA

M

IDD

AS T

116 18116 116 69116 197 18 1818 19718 18197

Headcount

Engagement

Headcount reduced slightly in the year ended 31 March 2016 to 18,052. This primarily reflects the reductions in the Middle East and Asia Pacific to improve productivity.

Ensuring our people feel valued and motivated at work underpins our ethos and supports our strategy for growth. We know there is always room for improvement, therefore, we ask our people to tell us what they think and then involve them in our plans for change.

We remain focused on attracting people into engineering careers and use a variety of platforms to encourage students including visits by our own graduates to school and university events. We hired over 400 graduates in September 2015 globally and will be targeting a similar number for our 2016/17 intake. Our apprentice programme continues to attract school leavers choosing a career in engineering. Further details are provided in the UK and Europe business review (page 22). Our Group wide careers website gives our people easy access to all our vacancies throughout the world and helps to encourage internal mobility. As well as developing our talent pool in local markets, we have an experienced team of people working on planned international assignments across the Group, either to supplement skills not available locally by bringing specific technical knowledge to bear or to help resource the delivery of larger projects. We have focused on building a mobility pipeline of people who are keen to work in different geographies so that we can match our available talent with appropriate vacancies around the world (figure 2).

Every year we ask our people around the world to participate in our Viewpoint employee engagement survey. This survey comprises a series of strategically important themed questions, aligned to a pre-defined engagement model which measures our people’s relationship with management and how they feel about their jobs and the Group. Group results are communicated within our businesses and via our Group wide intranet to ensure our people understand the key feedback themes and are confident that actions will be taken as a result of the survey. Our 2015 survey included 80 questions and was completed by 76% of our people. Our overall engagement score was 69% – a good result, an improvement over the prior year and 10 points higher than the global norm for organisations in the professional services sector. Questions about carrying out work safely remain among our top scoring areas, with 97% of people understanding how to work safely. Greater collaboration, client proximity and technology are fundamental to our ability to differentiate ourselves from our competitors, to win more work and to exceed client expectations. It was therefore encouraging to see that this is another area of improvement. It is also evident that people across Atkins continue to care about the success of our organisation (95%).

MIDDLE EAST ASIA PAC ASIA PAPAC C

ASIA PAC

1976918 69

69

AS

IA

IFIC

STRATEGIC REPORT

TH OR

Areas where we have scope to improve further include our ability to retain our best people and give them a clear career path. The Group operational leadership team will continue to use the survey outputs to improve our employee engagement and is committed to developing a set of clear actions each year to address the feedback. Day to day we maintain regular communication with our employees through a range of digital media, with content relating to our client wins, project successes, thought leadership and stories about our people all available on our intranet. We supplement online channels with face to face town hall meetings and line manager team briefings. To coincide with the announcement of our financial results, we provide updates on our Group performance via webinar for senior management and video for all colleagues. Our senior leadership teams hold meetings and open discussions to give employees the opportunity to ask questions about our strategy and future plans. We also use webinars and ‘all hands calls’ to engage with our people and give them the chance to participate and ask questions directly.

GOVERNANCE

OP E

FINANCIAL STATEMENTS

18

UK & EU EUROPE AMERICA AMERICA MIDDLENORTH EAST A AMERICA UK UK & EUROPE ASIA PAC UK & EUROPE MIDDLE EAST M & EUROPE LEMIDDLE R NORTH NORTH E EAST

& UK

N

NORTH AMERICA

ASSIGNEES ASSIGNEES BY LOCATION BYASSIGNEES LOCATIONBY LOCATION

Another popular communication channel is our CEO blogs, through which our regional, Advisory, Energy and Faithful+Gould CEOs share informal thoughts, images and updates. INVESTOR INFORMATION

SIGNEES BY LOCATION

WS Atkins plc Annual Report 2016

44

Our people continued

Investment in people Working with our clients and partners on the delivery of complex solutions requires that we continually develop and enhance the capabilities and performance of our people. The Group’s annual training spend has been maintained at £22m (2015: £22m). Our award winning My Career system, automates the performance appraisal process across the Group. We continue to develop and simplify the process to provide greater clarity of objectives, improve visibility and tracking, and also strengthen the link between performance review and reward. This has provided an improved process for the targeting and delivery of training, at the same time allowing greater access to online learning and tracking of learning and compliance training. The identification, development and deployment of key talent is a constant focus and during the year we piloted a new approach towards talent management through our My Career platform to ensure that we are identifying potential systematically. This will be rolled out further across the Group during the 2016/17 financial year. 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. This puts our graduate and apprenticeship programmes at the heart of developing our talent for the future. During the year, in addition to our significant graduate intake, we recruited a further 81 apprentices. We are a member of the ‘5% Club’, an industry-led campaign whose member organisations make a

WS Atkins plc Annual Report 2016

public commitment to have at least 5% of their UK workforce on formal graduate and apprenticeship schemes. Our current proportion is 12.3% (2015: 8.9%) of UK headcount. We continue to engage with schools and colleges to attract students into studying science, technology, engineering and mathematics (STEM) subjects and encourage them towards careers in our industry. One of the key requirements of our growth ambition is the ability of our people to get close to our clients and to understand their drivers and requirements. Our worldwide sales excellence programme has continued to strengthen the capability of our people in these areas. More than 370 staff attended programme modules during the year. During the year, we also launched our global project management academy aimed at providing a platform to continuously develop the capability of our project managers across the Group. More than 5,300 courses have been completed through the academy during the year.

To inform the salary review and other reward decisions, we conduct comprehensive annual benchmarking studies across our regions. We use the data to improve the competitiveness of our remuneration packages and to help line managers with pay decisions. Approximately 1,100 senior leaders worldwide participate in our executive bonus scheme. We believe this incentivises the delivery of above average financial results and exceptional individual performance by rewarding the achievement of stretching targets and personal objectives. 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.

Figure 3: Viewpoint Group scores by gender as provided by Ipsos MORI 70

69 58

59

Female Global norm

Male Global norm

Reward Pay movement across the Group varies by sector and geography. This reflects both the diversity of our businesses and the variability in market conditions between sectors. With effect from 1 April 2016, the average salary increase was 2.4% across the Group. Pay review budgets were relatively conservative, to reflect market conditions and business performance.

45

STRATEGIC REPORT

Strategic Report > Our people

Diversity and inclusion We are committed to building a diverse organisation to maximise the skills available to us in the regions in which we operate. Policies have been adopted to ensure this commitment is implemented from the point of attraction and recruitment and continues

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 retain and retrain, as necessary, employees who become disabled during the course of their employment.

A women’s professional network is now well established in our major office locations. The gender balance of the senior management population increased to 13.3% over the course of the year. As we continue to work to increase the proportion of female staff in Atkins, we have developed a range of flexible working options to help us both recruit and retain a broader range of staff. This is supported by our Viewpoint results, which showed an improvement in the scores provided by women in many areas.

Figure 4: Gender split as at 31 March 2016 7

14

3

918

14,321

141

GOVERNANCE

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.

FINANCIAL STATEMENTS

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 through salary sacrifice arrangements. Approximately 12.5% of eligible employees participate in the SIP.

5,281

Board membership Female Male

Senior leadership team Female Male

Senior management Female Male

Employees Female Male

There were 10 members of the Board, seven were male and three were female.

Two senior leadership team members were female.

There were 1,059 senior managers (including directors of subsidiary companies within the Group) at Atkins. Of this number 918 were male and 141 were female.

Excluding our Group senior leadership team and senior management population, there were 19,602 employees at Atkins of whom 14,321 were male and 5,281 were female.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

2

46

Our responsibility Within our corporate sustainability reporting we showcase the expertise and drive that exists within Atkins to support our clients to tackle sustainability challenges. The future depends on what we do today.

Sustainability is an integral part of our purpose. Within our corporate sustainability reporting we showcase the expertise and drive that exists within Atkins to support our clients to tackle sustainability challenges, such as population growth, urbanisation, resource scarcity, skills

shortages, energy security and climate change. In order to measure our impacts on society, the environment and the economy, we theme our sustainability activities around three pillars; a society for our future, an environment with a future and a responsible business of the future.

I ND

IREC T

CONTRIBUT

Nested below these pillars are a total of 11 sustainability principles. We provide detail of our progress against each of these principles on our website www.atkinsglobal.com/ responsibility and highlight some of the most significant developments within this report.

I ON

T

TC ON

BU T

RI NT

EC

Environment

Business

UT

C RE

RI B

O TC

T

DIRECT CONTRIBUTION IO

N

IN

DI

C L I EN T

WS Atkins plc Annual Report 2016

I ND I R

I ON

C T I ON RE D I I BU T TR

CO DIR NT EC R IB T UT IO N

N CO

CL

I EN

I EN

CL

T

Society

47

STRATEGIC REPORT

Strategic Report > Our responsibility

Leadership As part of our commitment to becoming a more responsible and sustainable organisation we continue to share best practice with senior leaders throughout the Group. Kelvin TOPSET training has been rolled out across the Group (excluding mainland Europe). TOPSET teaches companies how to investigate incidents, to understand the causes and to prevent incident recurrence, while helping to standardise and simplify incident investigation procedures. As part of our behavioural safety programme, safe by

Raising safety and welfare standards We continue to promote improvements in health and safety standards across our industry. An important channel for this is the global network of Consultants’ Health and Safety Forums which we have often been instrumental in establishing. Our people also play their part in driving up standards through engagement in industry leadership and participation in professional forums and conferences.

Inspiring the next generation We recognise that inspiring the next generation of engineers to build a sustainable future is critical and our careers website advertises all of our early career opportunities with dedicated graduate pages. We also run a variety of science, technology, engineering and mathematics (STEM) outreach programmes focused on encouraging young people to study STEM topics and consider related careers. Further information about our approach and the number of people attracted to our graduate and apprenticeship programmes can be found within Our people (page 42). Supporting our people’s development We are committed to supporting our people’s development, equipping them to deliver innovative and sustainable solutions. We have held a series of webinars about carbon critical buildings, open to all employees Group wide and hosted by our own sustainability experts, and challenged our people to contribute to the debate about whether, and how, we can make buildings zero carbon by 2020.

GOVERNANCE

We continue to place great emphasis on our technical leadership through Atkins Fellows, a group of experts in their fields, and our technical networks. Much of our technical leadership is highly relevant to the sustainability challenges that society faces. An example is a report we have published on Journeys of the Future – Introducing Mobility as a Service. This looks at how technology will be a critical driver of change in the transport sector in the coming years and how traditional assumptions regarding transportation will be challenged.

A society for our future

FINANCIAL STATEMENTS

By far our greatest contribution to sustainable development is through the work we carry out for clients and so much of our reporting relates to our indirect contribution.

leadership training has been rolled out to senior managers and directors Group wide as we seek to lead and positively influence our industry and set its standards.

This is the sixth year that health and safety standards in our UK business have been recognised by a Royal Society for the Prevention of Accidents Gold Medal.

INVESTOR INFORMATION

As one of the world's major design, engineering and project management consultancies, we help to provide the minds and ideas behind transforming the world’s built environment and play a central role as stewards of society’s economic, social and environmental fabric. This can be considered our indirect contribution. Our direct contribution is who we are and how we behave as an organisation, demonstrating responsibility and accountability to our stakeholders. We believe we have a responsibility to help enable a sustainable future through our leadership role, our operations and the services we provide.

WS Atkins plc Annual Report 2016

48

Our responsibility continued

A healthy, safe and secure workplace We are committed to providing and maintaining a safe and healthy working environment for our employees and ensuring the safety of others affected by our operations and services. Through our corporate Wellbeing programme, we have adopted a range of strategies to improve employee health and wellbeing. For example, we have started to pilot desks that enable people to stand as they work, generating a range of health benefits, as part of our agile working initiative. We have also launched WellbriefingTM, a tool that helps our clients put people’s wellbeing at the heart of building design. It focuses on nine interconnected physical and psychological aspects and provides a useful benchmark for post occupancy evaluation of the building, assessing whether our designs have been effective in improving occupants’ wellbeing.

WS Atkins plc Annual Report 2016

AIR (staff & contractors) 1000

800

Number

Social and community investment We encourage and support our people to make an even greater contribution to the social, environmental and economic health of our communities. Across each segment, we focus our efforts where we believe our skills can do the most good. For example in North America, The Atkins Foundation, which funds STEM related activities, student scholarships, and communitybased programmes, donated over $96,000 to fund projects across America. In Asia Pacific, our Indian offices have raised funds for the SUKRUPA education centre, which provides free schooling, food and basic health care for pre-school children, and also supported a local orphanage. In the UK, we received the Gold Defence Employer Recognition Scheme award from the Ministry of Defence in recognition of our support for staff who are Armed Forces Reservists.

600

400

200

0 11–12

12–13

13–14

14–15

15–16

Year Office actual

Engineering actual

Atkins operating safely, a bespoke system designed to help keep our people safe when they are visiting sites and unfamiliar offices, was successfully launched in 2014/15 in the UK and the system is now being used in North America and the Middle East. We are focused on promoting our security principles across the Group to build our security culture. Part of our code of conduct focuses on the safety behaviours of our employees, highlighting the importance of reporting any health and safety issues or near misses. We continue to work with colleagues, clients and our supply chain to try to ensure that health, safety and security are fully integrated into our decision-making processes.

Construction actual

Safety performance The accident incidence rate (AIR) is an industry measure of the number of reportable accidents per 100,000 staff. Our AIR figures summarise employee and supply chain performance. This performance is categorised into working in offices, in engineering environments (e.g. on-site support activity) and in construction, involving installation or construction activity. In each case, our level of performance compares well with industry averages. Our office and construction AIRs have improved again this year, however there has been a very small increase in the engineering AIR. This is due to one additional accident in this category being reported.

Strategic Report > Our responsibility

49

Region Source

Scope 1 Liquid fuels

Scope 3

2015

Rail

Air

Regional total

Regional total

1,174

4,052

22,019

22,582

108

104

971

1,118

1

1,680

3,474

23,430

Road

Electricity

57

8,186

7,307

228

471

53

1,713

Middle East

638

1,906

1,921

4,465

4,735

Asia Pacific

6,937

7,623

3,458

18,018

4,556

48,947

56,421

Europe

1,243 4

North America

Source totals

27

1,247

27

Heat

2016

Refrigerants

UK

Gas

Scope 2

56

57

16,042

19,020

56

1,283

11,215

2016 Total

17,373

Total

19,076

Total

12,498

2015 Total

17,826

24,778

STRATEGIC REPORT

Table 1: Total emissions by source, region and scope in tonnes of CO2 for the years ended 31 March 2016 and 2015

13,816

Measuring and reporting emissions to stakeholders and investors We have disclosed data to CDP (formerly the Carbon Disclosure Project), the global platform for organisational disclosure of investor-relevant climate change data, for the last seven years. The Group again achieved certification to the ISO 14064 international standard for quantification and reporting of greenhouse gas emissions. We report on gas, electricity and 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. Reducing our emissions We have consolidated office space and moved to agile office environments to help to reduce the energy we consume in our offices. We are also making better use of telecommunications and video conferencing to reduce travel related emissions, in particular with the introduction of Skype for business.

In Tianjin province of China, the Atkins designed TEDA H2 building won a certificate of excellence in the A&D Trophy Awards 2015 under the category of Green or Sustainable. This is the world’s first lowcarbon building to have been accredited with four green building certificates under different assessment schemes: the US LEED (Gold), the Chinese 3-Star (3 stars), the Japanese CASBEE (S Class) and the UK BREEAM (Very Good). The building was also named the Best Green Development by China Property Awards 2015. Affordable, reliable and clean energy As well as working to reduce emissions from our own operations, we also use our technical expertise in this area to help clients incorporate energy efficiency and low carbon design into their projects. For example, we are working with clients on the installation and use of combined heat and power (CHP) generation systems. The project aims to turn the excess biogas produced into useful energy. Being able to use both renewable and fossil fuels, CHP plants can provide electricity with efficiency ratings in excess of 80%, helping to reduce energy costs and greenhouse gas emissions effectively and contributing to the development of a sustainable environment.

A multidisciplinary Atkins team recently carried out a research project for the Energy Technologies Institute (ETI) which forms part of a new report into the future development of the UK’s energy systems. The Power Plant Siting Study provided analysis into the siting constraints of potential locations for new low carbon and nuclear power stations and promoted the benefits of a mix of generation options including conventional nuclear reactors and small modular reactors (SMRs), carbon capture and storage and other low carbon technologies to produce a more robust and fit for purpose system. According to the report, published by ETI, both large scale new nuclear plants and SMRs will potentially play a major role in the move to an affordable low carbon economy. As discussed in our Energy segmental performance review (page 33), we have developed for Hexicon an innovative multi-turbine offshore wind floating platform. It will be tethered to the seabed by an innovative active mooring system, allowing the whole structure to be rotated by up to 45 degrees to maximise the energy capture and minimise wake effects from the adjacent turbines. Atkins in Norway has a central role in the planning and development of five solar power plants in Egypt where the Government plans to supply 20% of installed capacity for renewable energy.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

A low carbon economy We have continued our work to become a low carbon organisation.

Transition to a low carbon economy We are taking action to reduce the environmental impact of our own offices. For example, in the UK, we have designed a new 1,000 person purpose-built office for our teams, allowing us to exit and demolish an energy inefficient 1950s office block.

INVESTOR INFORMATION

An environment with a future

GOVERNANCE

Expressing the emissions using employees as a ratio gives us a figure of 2.7 tonnes CO2e per employee. This is a reduction on the ratio for the year ended 31 March 2015 of 3.1 tonnes CO2e per employee.

50

Our responsibility continued Respect for human rights is critical to us and we seek to have a positive influence wherever we operate.

In Jeddah, KSA, we are working in partnership with Al Muhaidib, Vinci and the National Water Company, designing the Briman Strategic Water Reservoir, the world’s largest drinking water storage facility. Respect for the environment Managing resources Our office sustainability programme, RACE2, is designed to get all of our people thinking and acting more sustainably and has continued to put our sustainability principles into action in our offices worldwide. Awards for contributions to the programme are being opened up across the Group for the first time in 2016. Environmental projects for clients In North America, we designed South Pointe Park Pier which was named as Project of the Year by the Miami-Dade Branch of the American Society of Civil Engineers in the $10m or less construction cost category. Protecting corals and water quality was pivotal to the project.

A responsible business of the future Technical excellence We continue to provide sustainable value and technical excellence for our clients, using management standards to develop more collaborative client relationships. For example, our Right First Time behavioural programme, builds on the technical assurance standard that we have developed to define the requirements for all technical deliverables across the Group. We are using new materials to achieve the kind of technical excellence required to drive the development of sustainable infrastructure. For example we won the Civil Engineering Project of the Year at the British Construction Industry Awards for Church Bridge Reconstruction, in South Gloucestershire. Through the use of adapted composite technology, familiar to us through our advanced engineering work for the wings of advanced civilian aircraft, our team designed and created one of the UK’s largest composite road bridges made entirely out of glass and carbon fibre. In the long term it is hoped this could help pave the way for a new generation of structures which cost substantially less over their lifetime than their concrete and steel equivalents. Our technical networks support people in achieving technical excellence. Urban planners from around the Group met in Shanghai in October for the annual conference of Atkins’ Urban Planning Technical Network. Innovative projects ranged from planning for rapid urbanisation, tourism and industrial development in Asia Pacific to infrastructure-driven regeneration projects in the UK and small scale urban design interventions in Scandinavia.

WS Atkins plc Annual Report 2016

Economic and environmental resilience We work with our clients and other partners to translate investment in infrastructure and technology into economic and environmental resilience. We are collaborating to produce research to inform and influence decisions about the best steps to ensure future economic prosperity. In the UK, our future proofing cities team worked in partnership with Oxford Economics and Centre for London to identify that London is significantly underestimating the level of investment in infrastructure required to keep up with the city’s growth over the coming decades. Strong governance and accountability Our commitment to behaving as a responsible business, demonstrating transparency and fairness, is outlined by our Group policy statements and sustainability principles. Our code of conduct, Behaving the Atkins Way, which sets out what it means to think and behave as part of Atkins, has been firmly embedded across the Group. Respect for human rights is critical to us and we seek to have a positive influence wherever we operate. We are proud of Atkins’ minimum requirements (AMR), which we developed a few years ago to enable us to influence clients and contractors in the Middle East to raise standards of health, safety and welfare during construction projects. The principles of AMR have now been adopted by a range of clients, consultants, contractors and others across our industry. The UK Modern Slavery Act resonates with our values and approach.

51

Our knowledge partnership with Connect4Climate, a World Bank-sponsored initiative dedicated to raising awareness about climate change issues globally, is based upon our future proofing cities work, which creates a framework for understanding and addressing the risks that cities face.

We are very proud of our people’s commitment to Atkins’ sustainability principles and of their growing effect on our activities and operations. We have a central role as stewards of society’s economic, social and environmental fabric and, as a result, have a direct impact on the future through the work we do and the way that we do it. Playing our part as a responsible business is important to us, and we look forward to making further progress in the year ahead.

This Strategic Report was approved by the Board and signed on its behalf by

Prof Dr Uwe Krueger CEO 15 June 2016

FINANCIAL STATEMENTS

We are delighted to have been appointed as the lead consultant for developing sustainable infrastructure under the new Infrastructure Project Preparation Framework established by the European Bank for Reconstruction and Development. Over a three-year period (2015–2017), we will work to improve the efficiency and replicability of infrastructure projects for the benefit of the Bank’s clients.

In the UK, we have launched a centre for research and innovation with the University of Birmingham, Imperial College London and the British Geological Survey. Over the next five years, the centre will bring together academics, researchers and industry to build an integrated approach to managing the economic and environmental impact of groundwater infiltration into infrastructure. The long-term aim is to develop preventative techniques that will reduce ongoing asset management costs and improve environmental standards for the industry while reducing the risk of flooding in towns and cities.

INVESTOR INFORMATION

Strategic engagement for innovation Across our worldwide business, we are playing our part in strategic engagement, aimed at developing innovative, sustainable infrastructure, responding effectively to climate change and initiating environmental protection initiatives.

GOVERNANCE

STRATEGIC REPORT

Strategic Report > Our responsibility

WS Atkins plc Annual Report 2016

52

Our Board of directors Key experience: • Chartered engineer • Over 40 years’ international experience in the automotive, aerospace and defence industries

Allan Cook CBE Chairman Appointed to the Board: 2009 (non-executive director); 2010 (chairman) Tenure: 7 years Nationality: British Board Committee Membership: Nomination (chairman)

Other current appointments: • J.F. Lehman & Company – member of operating executive board • Departmental Board for BIS – lead nonexecutive member

• Fellow, Vice President and trustee of the Royal Academy of Engineering (RAE)

• Defence Growth Partnership – industry co-chair

• Chairman of the RAE’s employerfocused Diversity Leadership Group, part of the Department for Business Innovation & Skills (BIS) STEM (science, technology, engineering and maths) Diversity Programme

• Sector Skills Council for Science, Engineering and Manufacturing Technologies Alliance (SEMTA), UK Government’s Skills & Jobs Retention Group, UKTI’s Advanced Engineering Sector Advisory Board – chairman

Previous appointments include: • BAE Systems, GEC-Marconi, Hughes Aircraft – senior roles

• Baker Dearing Educational Trust – lead non-executive director

• Cobham – chief executive

• National Skills Academy for Manufacturing Limited – director

• Finmeccanica UK and Selex ES – chairman

• Greenpower Education Trust – patron

• Marshall of Cambridge (Holdings) – deputy chairman • Aerospace and Defence Industries of Europe (ASD), British Aerospace and Defence Companies (SBAC) – president Key experience: • Physicist • PhD in complex system theory from the University of Frankfurt

Prof Dr Uwe Krueger

• Majority of career spent leading engineering and consulting organisations in North America, Europe, the Middle East and Asia Pacific

CEO

• Fellow of the Institution of Civil Engineers

Appointed to the Board: 2011

Previous appointments include: • Cleantech Switzerland – president

Tenure: 5 years Nationality: German Board Committee Membership: None

• Hochtief – variety of senior roles including chief executive officer (central and eastern Europe) • Oerlikon – chief executive officer • STR Holdings – board member • Texas Pacific Group – director/senior advisor • Turner International – chairman and senior vice president • Global Strategic Infrastructure Initiative, World Economic Forum – co-chairman

For detailed biographies please go to: www.atkinsglobal.com/boardofdirectors

WS Atkins plc Annual Report 2016

Other current appointments: • Aggreko plc, Ontex S.A. (Zele, Belgium), SUSI Partners AG (Zurich, Switzerland) – non-executive director • Switzerland’s Administrative Commission for the Decommissioning and Disposal Fund (Switzerland) – committee member

53

Key experience: • Chartered accountant

Other current appointments: None

• Mathematics graduate • Trained at Price Waterhouse (now PricewaterhouseCoopers LLP)

Group finance director Appointed to the Board: 2009 Tenure: 7 years Nationality: British Board Committee Membership: None

Previous appointments include: • British Airways – variety of senior finance and corporate development roles including head of business performance and group financial controller • Morgan Crucible – variety of senior corporate development roles

Key experience: • HR professional • MSc in human resources

Other current appointments: • International Advisory Board, Open University Business School – member

GOVERNANCE

Heath Drewett

• Member of the Institute of Chartered Accountants in England and Wales

STRATEGIC REPORT

Governance > Our Board of directors

• Significant leadership and HR experience for international organisations

Group HR director Appointed to the Board: 2014 Tenure: 2 years Nationality: British

Previous appointments include: • BOC Group, Hays, Linde – group HR director • PA Consulting Group – global head of HR • CIPD – non-executive director

Board Committee Membership: None Key experience: • Corporate finance professional • LLB (Hons) and a qualified barrister • Over 30 years’ experience in all areas of corporate finance

Senior independent director Appointed to the Board: 2007 (non-executive director); 2011 (senior independent director) Tenure: 9 years Nationality: British

• Phoenix Group – head of strategy, corporate development and communications

• Hill Samuel Bank – variety of roles including head of financial institutions group

INVESTOR INFORMATION

Fiona Clutterbuck

Previous appointments include: • ABN AMRO Investment Bank – managing director and head of financial institutions advisory

Other current appointments: • The Paragon Group of Companies PLC – senior independent director

FINANCIAL STATEMENTS

James Cullens

• Chartered fellow of the Chartered Institute of Personnel and Development (CIPD)

• HSBC Investment Bank – managing director and global co-head of financial institutions group

Board Committee Membership: Audit; Nomination; Remuneration (acting chairman)

WS Atkins plc Annual Report 2016

54

Our Board of directors continued Key experience: • Degree in finance and international affairs • Investment banker • 34 years advising corporates and other clients in the UK, USA, continental Europe and Asia

Catherine Bradley Non-executive director Appointed to the Board: 2015 Tenure: 1 year Nationality: French Board Committee Membership: Audit; Nomination

Previous appointments include: • Credit Suisse – managing director, head of equity-linked solutions group (Asia Pacific) and head of coverage for UK corporates, government and European private equity companies • Dresdner Kleinwort Wasserstein – head of equity block and convertible bonds team

Key experience: • MA in Economics • Completed the Harvard Business School Advanced Management Program • Over 23 years' senior board level experience in international energy services

Allister Langlands Non-executive director Appointed to the Board: 2013 Tenure: 3 years Nationality: British Board Committee Membership: Audit (chairman); Nomination; Remuneration

• Member of the Institute of Chartered Accountants of Scotland

Thomas Leppert

• Over 30 years’ experience in leadership positions in both the public and private sectors including construction, financial services and real estate

Non-executive director

• Mayor of the City of Dallas, Texas

Tenure: 3 years

Previous appointments include: • Castle & Cooke – president and chief executive officer

Nationality: American

• Kaplan – chief executive officer and chief operating officer

WS Atkins plc Annual Report 2016

• Société Générale – head of equity advisory, global markets (Asia Pacific) • Swiss Bank Corporation – executive director Other current appointments: • PSA Peugeot Citroen – supervisory board member • FICC Markets Standards Board – board member • Financial Conduct Authority – non-executive director

Other current appointments: • Exova Group plc, Maven Income and Growth VCT 5 PLC – non-executive chairman • Standard Life UK Smaller Companies Trust plc – non-executive director • Director of a number of private companies

• John Wood Group – a variety of roles including chairman, chief executive and group finance director

• MBA with distinction from Harvard Business School

Board Committee Membership: Nomination; Remuneration

• Paribas – head of European strategy equity advisory team

Previous appointments include: • Deloitte Haskins & Sells/ Coopers & Lybrand Deloitte (now PricewaterhouseCoopers LLP) – partner

Key experience: • Economics and accounting graduate

Appointed to the Board: 2013

• Merrill Lynch – variety of investment banking roles

• McKinsey & Co. – principal/partner

• Pacific Century Financial Corporation and its major subsidiary, the Bank of Hawaii – vice chairman • Trammell Crow Company – national partner • The Turner Corporation – chairman and chief executive officer Other current appointments: • Aditazz, View, Inc., AT&T Performing Arts Center – director • Austin Industries, Inc. – non-executive director • Baylor Health Care System, Claremount McKenna College – trustee

55

Key experience: • Mechanical engineer • Fellow of the RAE, Institution of Engineering and Technology (IET), Institution of Mechanical Engineers, Chartered Institute of Management and Institute of Directors

Appointed to the Board: 2008 Tenure: 8 years Nationality: British/Indian Board Committee Membership: Audit; Nomination; Remuneration

Previous appointments include: • BOC Edwards – a variety of roles including chief executive

Appointed to the Board: 2015 Tenure: 1 year Nationality: American Board Committee Membership: Nomination; Remuneration

• HHV Pumps Private Ltd, The University of Manchester I3 Limited – chairman • Centre for Business Research, University of Cambridge – advisory board member

• Bodycote, Dyson Group – non-executive director

• Over 26 years’ experience as an international energy industry executive, within exploration and production, midstream operations and supply and trading Non-executive director

Other current appointments: • e2v technologies plc, Spirax-Sarco Engineering plc, Porvair plc – nonexecutive director

• BOC Group – executive director

Key experience: • Mechanical engineer

Gretchen Watkins

• IET – vice president

Other current appointments: • Maersk Oil & Gas – chief operating officer

Previous appointments include: • BP – variety of roles including director general BP Vietnam and China, vice president natural gas liquids business Canada and president BP Netherlands Energy

GOVERNANCE

Non-executive director

• IET’s IEE Eric Mensforth International Gold Medal for outstanding contribution to manufacturing technology and management in 2003

• Council for Science & Technology – member

FINANCIAL STATEMENTS

Dr Raj Rajagopal

• Audit Commission – commissioner

STRATEGIC REPORT

Governance > Our Board of directors

• Marathon Oil Corporation – vice president, North American production operations and vice president, international production operations

INVESTOR INFORMATION

• Independent Petroleum Association of America – director

For detailed biographies please go to: www.atkinsglobal.com/boardofdirectors

WS Atkins plc Annual Report 2016

56

Directors' report The directors of the Company present their report together with the audited consolidated financial statements for the year ended 31 March 2016. As permitted by legislation, the following information and disclosures that are required under company law, the UK Listing Authority’s Listing Rules and Disclosure and Transparency Rules (the LRs and DTRs respectively), are included elsewhere in the Annual Report and are incorporated into this report by reference: Disclosure

Section of Annual Report

Location

Disclosure

Section of Annual Report

Location

Board of directors

Our Board of directors

Business model

Our business

Group code of conduct

Corporate governance report

67

Conflicts of interest

Corporate governance report

64

Directors’ share interests

Annual remuneration report

166

Directors' service contracts

Directors' remuneration policy

89

Employment matters including Our people diversity and inclusion

42

Dividends

Chairman’s statement

05

Principal risks and uncertainties

Principal risks and uncertainties

36

Events occurring after the reporting period

Financial Statements note 40

191

Results for the year

Our Group

Financial instruments and financial risk management

Financial Statements note 20 and 21

157

52

09

Review of performance and future development of the Group

Strategic report

Greenhouse gas emissions

Our responsibility

Human rights

Our responsibility

Important events affecting the Company during the year

CEO's business review

16

Internal controls

Corporate governance report

66

02

49

50

02

Information required under LR 9.8.4R Section

Information requirement

Section of Annual Report

(12)

Shareholder waivers of dividends

Directors’ report

58

(13)

Shareholder waivers of future dividends

Directors’ report

58

WS Atkins plc Annual Report 2016

Location

Governance > Directors' report

57

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.

Post-balance sheet events

STRATEGIC REPORT

Annual General Meeting The Annual Report will be laid before shareholders at the annual general meeting (AGM) to be held at: The Lincoln Centre, 18 Lincoln’s Inn Fields, London WC2A 3ED at 1100 on Tuesday 2 August 2016.

On 11 April 2016 the Group acquired the projects, products and technology (PP&T) segment of EnergySolutions for a cash consideration of $318m (approximately £226m), subject to working capital adjustments. The acquisition includes the integration of 650 people who deliver a wide range of technical engineering and programme management services for the decontamination and decommissioning of high hazard nuclear facilities. Most of these staff are based in North America. The acquisition expands the Group’s service offering in the nuclear energy sector and will significantly enhance the Group’s current nuclear capability, particularly in North America. PP&T also adds a significant portfolio of innovative, proprietary nuclear waste treatment technologies. Further details regarding the transaction can be found in note 40 to the Financial Statements (page 191).

Each director listed in the Board of directors section of the Annual Report (pages 52 to 55) served throughout the year, except Catherine Bradley and Gretchen Watkins who were appointed to the Board on 9 June 2015 and 1 August 2015 respectively. Appointment and replacement of directors In accordance with the Company’s articles of association directors can be appointed or removed by the Board or by shareholders in general meeting.

GOVERNANCE

Directors

Under the Company’s articles of association all directors must retire at the first annual general meeting (AGM) following their appointment by the Board and may offer themselves for election by shareholders. Gretchen Watkins, following her appointment by the Board as a non-executive director from 1 August 2015, will stand for election at the AGM.

Directors’ indemnities 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. 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.

Research and development The Group develops and delivers innovative technical solutions to its clients, the costs of which are expensed to the Consolidated Income Statement (page 121). The Group obtains enhanced tax relief for these costs in certain territories, particularly the UK and the US. In the UK, the Group has adopted the RDEC (research and development expenditure credit) regime, further details on which are provided in note 1 to the Financial Statements (page 132).

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Powers of the directors Subject to the provisions of relevant legislation, the Company’s articles of association and any directions given by a special resolution of the 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 governance report (pages 61 to 68), the Nomination Committee report (pages 69 to 72), the Audit Committee report (pages 73 to 79), the Remuneration report (pages 80 to 111) and on the Group’s website (www.atkinsglobal.com/investors_governance).

FINANCIAL STATEMENTS

In line with the requirements of the UK Corporate Governance Code, all directors retire at each AGM and, if eligible, may offer themselves for re-election. This year all the directors, being eligible, will offer themselves for re-election. The Board considers that each of the directors standing for re-election continues to be effective and that each of them demonstrates a strong commitment to their role. In addition, the Board considers all non-executive directors standing for election and re-election to be independent in character and judgement.

58

Directors' report continued Political donations The Group made no political donations and incurred no political expenditure in the UK or European Union (EU) during the year ended 31 March 2016 (2015: nil). Since 1 April 2012, our policy has, in accordance with relevant US federal and state election laws, been to make corporate political donations only on the following basis: • directly to non-partisan ballot initiatives supporting infrastructure development and maintenance • to individual candidates and political parties only via the affiliated political action committees (PACs), funded entirely by employee contributions. Under this policy there were two donations totalling $13,000 made to non-partisan US ballot initiatives during the year ended 31 March 2016 (2015: $48,000). In addition, we have one PAC in the US that makes 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, of which 4,341,000 ordinary shares are held in treasury. 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 32 to the Financial Statements (page 184). Rights and obligations attaching to shares 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. Restrictions on transfer of securities There are no restrictions on the transfer or sale of ordinary shares and no requirements for prior approval of any transfers, except: • 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 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. ADR programme 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 programme, to receive dividend payments and vote by proxy on resolutions at a general meeting. Rights under the employee share schemes 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 33 to the Financial Statements (page 185). Own shares At the AGM held in 2015, 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 equivalent authority at this year’s AGM, details of which are contained in the notice of meeting.

WS Atkins plc Annual Report 2016

59

The Company was granted authority, by shareholders, at the 2015 AGM to purchase up to 10,011,000 ordinary shares, representing approximately 10% of the Company’s ordinary share capital as at 10 June 2015. No ordinary shares were purchased pursuant to this authority during the year ended 31 March 2016 or to the date of this Annual Report. 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 throughout the year and to the date of this Annual Report following a historic share buyback programme.

STRATEGIC REPORT

Governance > Directors' report

Significant shareholders The table below shows the holdings of 3% or more of the total voting rights attached to the Company’s issued share capital that had been notified to the Company as at the year end and the date of this Annual Report.

Shareholder

Number of voting rights1

Standard Life Investments Limited

13,006,724

12.99%

14,189,458

14.17%

8,116,169

8.11%

8,116,169

8.11%

Ameriprise Financial, Inc.

% of total voting rights1

At 31 March 2016 Number of voting rights1

% of total voting rights1

Royal London Asset Management Limited

5,321,259

5.32%

5,321,259

5.32%

Newton Investment Management Limited

4,994,861

4.99%

4,994,861

4.99% 4.88%

Schroders plc

4,886,849

4.88%

4,886,849

BlackRock Inc.

4,971,580

4.97%

4,971,580

4.97%

Norges Bank

3,985,209

3.98%

3,985,209

3.98%

GOVERNANCE

At 15 June 2016

1. Number and percentage of voting rights per last notification received by the Company.

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.

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 debt 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, thus restricting the Company's ability to operate.

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. Further information regarding the audit tender process and the anticipated proposal that KPMG LLP be appointed as the Company’s independent auditor for the financial year ending 31 March 2018 can be found in the Audit Committee report (page 77).

FINANCIAL STATEMENTS

Change of control provisions for employee share schemes are outlined in table 5 of the Remuneration report (page 90).

Approved by the Board and signed on its behalf by

Richard Webster Company secretary INVESTOR INFORMATION

15 June 2016 WS Atkins plc, Woodcote Grove, Ashley Road, Epsom, Surrey KT18 5BW, England Registered in England and Wales No. 1885586

WS Atkins plc Annual Report 2016

60

Directors’ statement of responsibility The directors are responsible for preparing the Annual Report, the Remuneration report and the Financial Statements in accordance with applicable law and regulations. Detailed below are statements made by the directors in relation to their responsibilities, disclosure of information to the Company’s auditor and going concern. Company law requires the directors to prepare financial statements for each financial year. Under that law, the directors have prepared the Group and Company Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU). Under company law the directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Company and Group for that period. In preparing these Financial Statements, the directors are required to: • select suitable accounting policies and then apply them consistently • make judgements and accounting estimates that are reasonable and prudent • state whether applicable IFRSs as adopted by the EU have been followed, subject to any material departures disclosed and explained in the Financial Statements. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the Financial Statements and the Remuneration report comply with the Companies Act 2006 (the Act) and, as regards the Group Financial Statements, Article 4 of

WS Atkins plc Annual Report 2016

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. The directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. Each of the directors, whose names and functions are listed in this Annual Report (pages 52 to 55), confirms that, to the best of his/her knowledge: • the Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group • the Directors’ report contained in the Annual Report (pages 56 to 59) 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.

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 was approved, so far as each director is aware there is no relevant audit information of which the Company’s independent 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 independent auditor is aware of that information. Approved by the Board and signed on its behalf by

Richard Webster Company secretary 15 June 2016

Governance > Corporate governance report

61

Corporate governance report For more information about our governance framework, visit: www.atkinsglobal.com/investors_ governance

STRATEGIC REPORT

Letter from the Chairman

Allan Cook Chairman

UK Corporate Governance Code The 2014 edition of the UK Corporate Governance Code (the Code) has applied to the Company since 1 April 2015. In response, the Board has looked in detail at the evolving expectations surrounding risk management and reporting and, for the first time, has produced a viability statement (page 37). Board performance evaluation The Board continually strives to improve its performance and welcomed the findings of the externally facilitated board performance evaluation during the year. We are already implementing the agreed actions and I look forward to concluding these successfully in the coming months.

Once again I look forward to meeting shareholders at our forthcoming annual general meeting (AGM) where I will be happy to answer any further questions you may have. Yours faithfully

Allan Cook Chairman 15 June 2016

Figure 1: Matters reserved for the Board include: • consideration and approval of strategy • general oversight of the Group’s operations • approval of major project bids and contracts • the Group’s capital, corporate, management and control structures

GOVERNANCE

It is with great pleasure that I present the Board’s annual report on corporate governance. This review, together with the reports of the Nomination, Audit and Remuneration Committees which follow, summarises our activities in this area over the past year.

Shareholder engagement We have undertaken a number of consultation exercises with our major shareholders as part of our continuing commitment to an open and transparent dialogue. These have included discussions regarding the Audit Committee’s independent audit tender (page 77) and the Remuneration Committee’s proposed changes to remuneration policy (page 82).

• approval of financial statements and shareholder communications • approval of dividend policy and interim dividends • approval of Group policies and the Group code of conduct • implementation and monitoring of internal control and risk management systems • approval of significant acquisitions and disposals • material changes to the Group’s pension schemes.

Board membership The Board welcomed Catherine Bradley and Gretchen Watkins as independent non-executive directors during the year, bringing wide ranging skills and expertise to our discussions.

INVESTOR INFORMATION

The tenure of Fiona Clutterbuck, our senior independent director, has been extended until 2017, subject to shareholder approval. Fiona has served diligently for over nine years and the Board believes that she remains strongly independent in character and judgement, as demonstrated in the recent, independently facilitated, evaluation of her performance. Further detail on the Nomination Committee’s recommendation to the Board regarding the extension of Fiona’s tenure is contained in its report (page 71).

FINANCIAL STATEMENTS

Dear Shareholder

WS Atkins plc Annual Report 2016

62

Corporate governance report continued Table 1: Board membership and Board and committee meeting attendance during the year1 Director

Board

Audit Committee

Remuneration Committee

Nomination Committee

–

–

3/3

Allan Cook

Chairman

10/10

James Cullens

Group HR director

10/10

Heath Drewett

Group finance director

Uwe Krueger

CEO

10/10

–

–

–

Fiona Clutterbuck

Senior independent director

10/10

4/4

4/4

3/3

Catherine Bradley3

Independent non-executive director

9/9

3/3

–

2/2

Allister Langlands

Independent non-executive director

9/10 4

4/4

2/25

3/3

Thomas Leppert

Independent non-executive director

10/10

–

4/4

3/3

Raj Rajagopal

Independent non-executive director

10/10

4/4

4/4

3/3

Independent non-executive director

6/6

–

–

1/1

Gretchen Watkins

6

9/102

–

–

–

–

–

–

1. Attendance is expressed as number of meetings attended/number eligible to attend. 2. Heath Drewett was unable to attend one short meeting due to a personal commitment having given his comments to the Chairman in advance of the meeting. 3. Catherine Bradley was appointed as a non-executive director on 9 June 2015 and became a member of the Audit and Nomination Committees on 1 July 2015. 4. Allister Langlands was unable to attend one short meeting due to illness. 5. Allister Langlands was appointed as a member of the Remuneration Committee on 1 July 2015. 6. Gretchen Watkins was appointed as a non-executive director and a member of the Nomination Committee on 1 August 2015.

Statement of compliance with the Code Throughout the year ended 31 March 2016 the Company complied with all of the provisions of the Code, published by the Financial Reporting Council (the FRC) in 2014, except the provision which requires all directors to attend the Company's AGM and for the chairmen of the Audit, Remuneration and Nomination Committees to be available to answer questions at the meeting. Unfortunately Raj Rajagopal, chairman of our Remuneration Committee, was unwell on the day of last year's AGM and was unable to attend. A copy of the Code is available on the FRC’s website: www.frc.org.uk. 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 its website: www.atkinsglobal.com/investors_governance.

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 our governance framework is the delegation of operational management to the CEO, with a matrix of authorities setting out how this is further delegated through the businesses. This enables the efficient and effective day to day operation of the Group’s different businesses. Further details on the roles of the chairman, CEO and senior independent director can be found on the Group’s website: www.atkinsglobal.com/investors_leadership. The CEO has established two teams to enable him to discharge his responsibilities effectively: the senior leadership team (SLT) and the operational leadership team (OLT). The SLT has wider participation and is more focused on communication and coordination while the OLT concentrates on strategy and its implementation, together with operational matters. The OLT provides a forum for the regional, Advisory, Energy and Faithful+Gould CEOs to focus on performance and to share best practice and knowledge. The Board has reserved a number of matters for its sole consideration. These are summarised in figure 1 (page 61). 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 69 to 72), the Audit Committee report (pages 73 to 79) and the Remuneration report (pages 80 to 111). 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.

WS Atkins plc Annual Report 2016

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63

Theme

Agenda items

Performance reporting

• Approval of trading updates • Approval of the full year results, 2015 AGM notice of meeting and associated documentation for the year ended 31 March 2015 • Approval of the half yearly results and associated documentation for the six months ended 30 September 2015

STRATEGIC REPORT

The key agenda items discussed by the Board during the year included:

• Dividend recommendation and approval (as appropriate) • Quarterly performance updates and business reviews (including human resources (HR) and quality, safety, security and environment (QSSE)) Strategy

• Annual review of strategy • Acquisitions of Howard Humphreys (East Africa) Limited and the projects, products and technology business of EnergySolutions • Post-acquisition review of Terramar AS

Operations

• Significant project approvals and reviews GOVERNANCE

• The Group’s banking facilities including a new revolving credit facility • Review of the Group risk log Budget

• Budget for the Group for the year ending 31 March 2017

Business presentations

• Asia Pacific • Energy and, in particular, the nuclear business • Faithful+Gould • Global design centre, India • Middle East • North America • UK and Europe, including the strategy for the Epsom campus • Atkins Acuity, the Group's new advisory business • Consideration of changes to risk management, risk appetite and reporting under the Code • Governance framework review • Review and revision 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

Shareholder engagement

• Updates on the views of shareholders following the announcement of results, investor meetings and roadshows • Independent feedback from the Group’s brokers following investor meetings • Reports from the investor relations director

FINANCIAL STATEMENTS

Governance

• Consideration of market reaction to key announcements Employees

• Review of the results of Viewpoint, the 2015 employee engagement survey

Board

• Appointments of Catherine Bradley and Gretchen Watkins • Appointment of chairman for a further three-year term • 2015/16 Board evaluation

The Board discussed the following matters following the conclusion of the financial year ended 31 March 2016 in respect of that year: • review of risk management and internal controls • approval of pre-close trading update • approval of the full year results and associated documentation • final dividend recommendation. Board membership during the year is shown in table 1 (page 62) along with a summary of attendance at meetings of the Board and its committees. Biographies for each of the directors are provided separately in Our Board of Directors (pages 52 to 55). During the year, the independent non-executive directors also met regularly with the chairman.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

• Approval of non-executive directors’ fees

64

Corporate governance report continued Allan Cook’s external commitments changed during the year following his appointment as the industry co-chair of the UK’s Defence Growth Partnership and as a patron of Greenpower Education Trust. He also stepped down from his position as deputy chairman of Marshalls of Cambridge (Holdings) Limited. 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, 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 March 2016. A more detailed statement regarding how the Board operates is available on the Group’s website: www.atkinsglobal.com/investors_leadership.

Effectiveness Nomination Committee Details of the work of the Nomination Committee can be found in the Nomination Committee report (pages 69 to 72). Performance evaluation The Board undertakes a rigorous and formal evaluation of its performance and that of its committees and directors annually. In line with the Code requirement, the Board believes that an external evaluation every three years brings further insight into its performance and processes. The last externally facilitated evaluation of its performance took place in the year ended 31 March 2013 and so this year its annual review was once again facilitated by Ffion Hague of Independent Board Evaluation. Independent Board Evaluation has no other connection with the Company. Each time it assesses its effectiveness, the Board: • reflects on its past performance and the implementation of past actions • considers its future training, skills, experience and diversity requirements • identifies and implements actions to improve its performance. The evaluation process adopted this year is set out in figure 2.

Figure 2: Board evaluation process

Inputs

June

August

September

Observe Board and committee meetings

One-to-one interviews1

One-to-one interviews1

Outputs

Draft reports compiled and discussed with chairman

October

November

Evaluation outcome and reports presented2

Action plan agreed by Board3

1. O  ne-to-one interviews were conducted with each of the directors, the company secretary, representatives of senior management (both operational and functional leadership), and representatives of third parties who have regular contact with the Board (brokers and independent auditor). 2. The overall report was presented to the Board, reports on the committees were presented to the respective committee chairmen, the report on the chairman was presented to the senior independent director, and the reports on each of the other directors were presented to the chairman. 3. The chairman met each director individually, and the senior independent director met the chairman, to provide feedback on their performance and suggestions for improvement.

The review explored a number of aspects of the performance of the Board, its committees and its directors. In summary, the Board concluded that it remained effective, with its performance overall having improved when compared with previous evaluations. However, the Board recognises the need to avoid complacency and continually strives to improve its performance, which led to the creation of an action plan to address those areas for development identified during the evaluation process. A summary of the aspects of performance that were considered, along with the outcomes of the review of each aspect and details of actions identified, is set out in table 2.

WS Atkins plc Annual Report 2016

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65

Aspect

Consideration

Outcome summary

Actions

Role and remit

• Objectives, focus and priorities

• Focus has improved although further work is needed to develop attention on the medium and long term

1. A  dditional updates on strategy to be scheduled throughout the year

• Strategy • Risk management • Governance and compliance • Decision-making

• Responsibilities between the Group Risk Committee, Audit Committee and Board are now clearer • Clear sense of direction with well-articulated headline strategy, although more regular updates regarding progress should be given

2.Major project reporting improvements to be implemented

STRATEGIC REPORT

Table 2: Aspects of performance considered, outcomes and actions

3. Non-executive directors to attend Group Risk Committee meetings where possible

• Major project reporting has further improved but additional evolution required

Composition

• Skills and experience • Diversity • Succession planning and talent management • Selection • Induction

4. N  omination Committee to continue to consider Group succession plan and talent in greater detail • The ongoing need to address risk of losing key Board members over next few years due to 5. Nomination Committee to assess longevity in post and length of tenure effectiveness of tailored induction • Additions made to Board since 2012 have made a positive difference to the Board’s capability and diversity

• Desire to maintain current gender representation

GOVERNANCE

• Decision-making effective and supported by appropriate information

programmes

• Continued need to drive advisors to identify suitable, but perhaps less visible, candidates • Rigour of recent Board inductions positive • Culture

• Culture is open and collegiate

• Teamwork/collegiality between executive and non-executive Board members

• Constructive relationship between executive and non-executive Board members

• With shareholders

• Opportunities to meet high performers within the business requires further development

• With senior management • Quality of external advice

6. D  evelop more informal networking opportunities with senior management

• Good engagement with shareholders

FINANCIAL STATEMENTS

Relationships

• Business awareness of non-executive directors is continually improving in line with time served on the Board • Quality of external advice varied across different disciplines

Procedural matters

• Meeting frequency, quality and duration • Chairmanship of meetings • Quality of supporting materials

• Meeting frequency has improved

None

• Quality of supporting materials has improved although the level of detail provided remains, on occasion, too great

Individuals

• Quality of contribution • Competence

• Discussed with each director individually

Agreed with each director individually

• Skills and experience • Time commitment • Understanding of the business • Preparedness for meetings • Understanding of role

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

• Board resources

66

Corporate governance report continued The actions identified will be implemented in the current financial year and progress will be considered as part of the next evaluation of the Board’s performance. Commitment During the year all directors, including the independent non-executive directors, committed significant time to the Company, in accordance with the requirements stated in their letters of appointment and service contracts. The Board considered details of the other significant commitments of Catherine Bradley and Gretchen Watkins prior to their appointment, to ensure that they each had sufficient time to undertake their role as non-executive directors. Development, business awareness and induction The chairman 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, directors have undertaken training on matters including mandatory audit rotation, cyber security and executive remuneration. 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 comprehensive, tailored induction programmes for Catherine Bradley and Gretchen Watkins included a series of meetings with members of the Group’s operational and functional leadership and external advisors to ensure that they both obtained a detailed overview of the Group, its businesses and governance and the regulatory environment in which it operates.

Accountability Financial reporting Statements regarding directors’ responsibilities and the status of the business as a going concern are given in the Directors’ statement of responsibility (page 60). Internal controls The Board is responsible for reviewing and approving the Group’s governance framework and ensuring its adequacy and effectiveness. A comprehensive review of the changes in this area following publication by the FRC in September 2014 of its Guidance on Risk Management, Internal Control and Related Financial and Business Reporting was undertaken during the year and a small number of enhancements were made to the Group’s governance framework. Our Group code of conduct, ‘Behaving the Atkins way’, sets out the standards and behaviours that all employees should consider when making decisions or taking actions. The Group code of conduct is part of our corporate governance framework and is an important element of our corporate compliance programme. The Group’s governance framework is illustrated in figure 3 (page 67).

WS Atkins plc Annual Report 2016

Governance > Corporate governance report

67

STRATEGIC REPORT

Figure 3: Governance framework

P CODE OF CONDU U O CT GR Regulation/legislation Articles of association Matters reserved for the Board Committee terms of reference

Board Quarterly business & financial reviews

Approved strategy

Internal audit

GOVERNANCE FRAMEWORK

Group

Risk reporting

Group authority matrix Service delivery process

QSSE reporting Control self-assessment

GOVERNANCE

Assurance

Design principles

Regions/ Businesses

Local legislation Industry requirements Budgets Risk management

Business management systems • Win work • Deliver work • Business operations • People

GRO UCT UP CO DE OF COND

Our governance framework reflects the devolved and decentralised structure of the Group, which is considered a key part of our ability to deliver services to our clients. Under this structure the Board has delegated operational responsibility to the CEO, who then delegates authority and control to the regional, Advisory, Energy and Faithful+Gould CEOs (who are all members of the SLT and OLT). Authority is further delegated from them to the managing directors of the principal operations and then downward to business and project managers as appropriate. This approach is reflected in our governance framework as follows:

FINANCIAL STATEMENTS

Independent audit

Policy statements

• the Group's policy statements approved by the Board, available on our website: www.atkinsglobal.com/policy-and-governance, set out clearly and succinctly our vision, commitment and arrangements, including: business conduct, risk management, employment, excellence in delivery, health, safety and security, sustainability and stakeholder communication • our Group code of conduct sets 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 • a Group Business Management System (BMS) framework incorporates all Group controls and forms the basis of each segment’s BMS, each of which adds the regional and industry-specific controls it requires to deliver our four key business processes of win work, deliver work, people and business operations, providing a single source of information for employees that enables them to understand their responsibilities and comply with all Atkins’ requirements.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

• Group controls set out mandatory activities and standards that are part of the overall Group processes and apply across the Group

68

Corporate governance report continued 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 control self-assessment reviews. Our 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 and other investments in which the Company does not have overall control are not covered by the Group’s governance framework. For these joint ventures and other investments, systems of internal control are applied as agreed between the joint venture parties or by management, but as far as possible we seek 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 2016 and up to the date of approval of the Annual Report. Support was provided by the Board's committees, 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 73 to 79).

Remuneration Details of the directors’ remuneration and the work of the Remuneration Committee can be found in the Remuneration report (pages 80 to 111).

Relations with shareholders We seek to establish an early and effective dialogue with shareholders regarding significant changes that affect corporate governance. This is in addition to ongoing engagement on more routine matters. The primary means used by the Board for communicating with all Company shareholders are the Annual Report, preliminary statement of annual results, half yearly results and the AGM. We also recognise the importance of the internet as a means of communicating widely, quickly and cost-effectively. An investor relations section is provided on our website: www.atkinsglobal.com/investors to facilitate communications with institutional and private investors. This includes material shared with fund managers and analysts at Company meetings. Our shareholders play an important role in the Group’s governance and their increasingly active engagement is welcomed. The investor relations director, alongside the CEO, Group finance director and chairman, provides a focal point for communication with existing investors and is always keen to engage with, educate and inform potential new investors. During the year Allister Langlands, chairman of our Audit Committee, led a consultation with major shareholders regarding the independent audit tender (page 77) and Raj Rajagopal, the previous chairman of our Remuneration Committee, consulted on changes to remuneration policy (page 82). The CEO and Group finance director present the preliminary statement of annual results and half yearly results to institutional investors and analysts. These presentations are also available via webcast and/or teleconference. An analyst event was held during the year to explain our work on London’s Crossrail project. The CEO, 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 brokers also provide updates to the Board on shareholder opinions and compile 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. Shareholders have the opportunity to attend our AGM, where all directors are expected to be available to answer questions. The directors in appointment at the time, other than Raj Rajagopal, attended our AGM in July 2015 and were available to speak to shareholders. Unfortunately Raj was unwell on the day of the meeting. We intend to call a poll for all resolutions to be considered at the 2016 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 2016 AGM are set out in the separate notice of meeting. Approved by the Board and signed on its behalf by Allan Cook Chairman 15 June 2016

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69

Nomination Committee report

Allan Cook (chairman) Catherine Bradley Fiona Clutterbuck Allister Langlands Thomas Leppert Raj Rajagopal Gretchen Watkins

New appointments We were pleased that our search to augment the skills and experience on the Board culminated in the appointment of Catherine Bradley on 9 June 2015 and Gretchen Watkins on 1 August 2015. Following these appointments, 30% of our directors are female, exceeding the 25% target set by Lord Davies in his Women on Boards report. Non-executive director succession It is important for us to ensure an appropriate balance of skills and experience is maintained on the Board and its committees, while ensuring progressive refreshing with new and diverse talent. Fiona Clutterbuck, as our senior independent director, has an important role to play in the search for our next nonexecutive director and as acting chairman of the Remuneration Committee. The search for a new non-executive director has already commenced. The Board, following a recommendation by the Committee, believes that the extension of her tenure until our 2017 AGM will enable the search to be properly managed and concluded. This will ensure that both Catherine and Gretchen are fully embedded in their new roles before we lose significant experience when Fiona ultimately steps down. More details on

Group succession planning The Committee has continued its focus on succession planning efforts being made below the Board, seeking to identify talent deeper within the Group and ensure that development gaps are addressed to provide a solid pipeline of future leaders. Following feedback from the recent independent evaluation of the Committee, we will continue our focus on robust succession planning in the current year.

www.atkinsglobal.com/investors_ effectiveness

Our responsibilities include: • evaluating the composition, balance of skills and membership of the Board and its committees • succession planning for directors and Board committees • reviewing succession plans for senior management roles • leading the selection process for Board appointments • making recommendations to the Board regarding director and committee appointments.

Yours faithfully

Allan Cook Chairman of the Nomination Committee

FINANCIAL STATEMENTS

I am very pleased to report on the work of the Nomination Committee. A brief summary of our activities during the last financial year is provided in figure 1 (page 70).

our work to manage succession for our non-executive directors can be found in our report (page 71).

For more information about the Nomination Committee (including its terms of reference) visit:

15 June 2016

INVESTOR INFORMATION

Dear Shareholder

10 September 2009 to date (from 1 February 2010) 1 July 2015 To date 25 June 2007 to date 4 September 2013 to date 1 October 2013 to date 1 March 2009 to date 1 August 2015 to date

Details of Committee meeting attendance can be found in table 1 of the Corporate governance report (page 62).

GOVERNANCE

Nomination Committee members

STRATEGIC REPORT

Letter from the Nomination Committee chairman

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70

Nomination Committee report continued Figure 1: Committee activities During the year ended 31 March 2016, key matters considered included: Appointment of a non-executive director •

• Succession planning (including emergency succession plan) • Senior leadership team succession plan • CEO succession planning

October

April

• Senior management development programme

Committee activities Non-executive director search •

• Appointment of Gretchen Watkins • Appointment of chairman for a further three-year term • Chairman succession planning

Election and re-election of directors • July

June

Board committee membership •

Board composition The Committee continues to focus on ensuring that the Board remains strong and effective. It seeks to recruit directors with the skills and diversity of perspective, experience, thinking style, gender, ethnicity and nationality to provide effective leadership, insight and challenge to support the Group’s continued development. New Board appointments We recommended the appointments of Catherine Bradley and Gretchen Watkins as independent non-executive directors during the year ended 31 March 2016. A detailed role specification was drawn up for each appointment and we mandated that gender-balanced shortlists were presented. Consideration was given to the benefits of all aspects of diversity, including gender, during the selection process. Short-listed candidates were chosen on merit and against objective criteria, which had been reviewed and approved by the Committee prior to the search commencing. Particular consideration was given to the areas of expertise that would best benefit the Board and the continued development of the Group, including corporate finance and engineering. The executive search firm Korn Ferry provided support to the Committee for both appointments. It has signed up to the Voluntary Code of Conduct for Executive Search Firms launched in July 2011 and, subsequently, the enhanced version launched in July 2014, which promotes gender diversity and best practice for corporate board search processes. During the year, Korn Ferry did not provide any other services to the Group. Chairman The Committee, chaired by Fiona Clutterbuck as senior independent director, recommended to the Board that Allan Cook be asked to serve for a further three-year term as chairman of the Company, subject to annual re-election by shareholders. The Committee also considered long-term succession planning for this position.

WS Atkins plc Annual Report 2016

Non-executive director succession Fiona Clutterbuck has served as an independent non-executive director since March 2007. She has reached nine years’ service and it was anticipated that she would step down at the conclusion of this year’s AGM. Raj Rajagopal will also reach nine years’ service as an independent non-executive director in 2017. On their retirement the Board will lose significant UK listed company experience and knowledge of our business and the Committee has carefully considered the possible short-term impact of this on the Board’s effectiveness. The Committee considered Fiona’s and Raj’s potential retirements in light of the experience and tenure of the Company’s remaining non-executive directors. Allister Langlands and Thomas Leppert are nearing three years’ service. Catherine and Gretchen will each have around one year’s service at the time of our AGM. The Committee was mindful that Rodney Slater and Jo Curin stepped down from the Board earlier than had been anticipated following three and five years’ service respectively. This ‘middle tier’ of independent non-executive director experience is, therefore, not as strong in the Board’s current composition. The Committee has sought to maintain an appropriate balance of skills and experience on the Board and its committees, while ensuring progressive refreshing with new talent. The Committee therefore recommended to the Board that Fiona’s tenure be extended by up to a year to enable this process to be completed. This will ensure that both Catherine and Gretchen are fully embedded before the Board loses her, and Raj’s, significant experience. Fiona, as senior independent director, also has an important role to play in the conclusion of the search for a further non-executive director to join the Board, in planning for the chairman’s future succession and as acting chairman of the Remuneration Committee. The search for a new non-executive director has already commenced but is unlikely to be completed until later this financial year. Fiona's tenure has been extended until 2017, subject to shareholder approval. Fiona has served diligently for over nine years and the Board agreed with the Committee's recommendation that she remains strongly independent in character and judgement, as demonstrated in the recent, independently facilitated, evaluation of her performance.

STRATEGIC REPORT

71

GOVERNANCE

Governance > Nomination Committee report

Diversity and inclusion While we are just below our own target of one-third female directors, we are pleased that, following the appointment of Catherine and Gretchen, we have achieved Lord Davies’ target of 25%.

Through the Group’s ongoing engagement with schools and colleges, we continue to remain focused on attracting students from diverse backgrounds into a career in engineering and also to support initiatives to promote career opportunities in STEM (science, technology, engineering and maths) subjects to female students. We hope that these efforts will augment the pool of talented professionals to join our business in the future. The Our people section (page 45) and segmental performance reviews (pages 25, 27, 29, 32 and 35) set out our commitment and approach to diversity, and highlight some of the initiatives being used to improve gender diversity.

Group succession planning The Committee undertook a detailed review of the Group’s wider succession plan during the year. The plan continues to focus on identifying a robust and diverse talent pipeline for key management and technical roles, identifying any skills gaps to ensure that individuals can be prepared to undertake the next step in their career when a vacancy arises. Through our review of this succession plan and other Group development activities, the Committee monitors the leadership needs of the organisation, both executive and nonexecutive, to ensure the continued ability of the Group to compete effectively in its chosen markets.

FINANCIAL STATEMENTS

The Board is committed to increasing diversity and inclusion, supporting the development and promotion of talented individuals regardless of gender, sexuality, nationality and race or ethnic background. Figure 2 (page 72) provides an overview of the Boards diversity.

INVESTOR INFORMATION

An external, independently facilitated, evaluation of the Board and its committees was carried out during the year. This evaluation highlighted, among other matters, the need for the Committee to seek to maintain the Board’s current gender representation and to address the risk of losing several key Board members due to length of tenure. More details regarding the evaluation are provided in our Corporate governance report (pages 64 to 66).

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72

Nomination Committee report continued Figure 2: Board sector and jurisdictional experience, nationality and gender Primary sector experience

Jurisdictional experience

Nationality

Gender

Engineering

50%

Global multinational boards 60%

British

50%

Female

30%

Finance

30%

Home market

British/Indian

10%

Male

70%

HR

10%

French

10%

Advisory Consultancy

10%

German

10%

US

20%

Approved by the Board and signed on its behalf by

Allan Cook Chairman of the Nomination Committee 15 June 2016

WS Atkins plc Annual Report 2016

40%

Governance > Audit Committee report

73

Audit Committee report

As chairman of the Audit Committee I am pleased to present its report for the year ended 31 March 2016. This report is intended to explain how we have met our responsibilities throughout the year and what we have done to address continued regulatory change. A summary of the Committee’s activities is provided in figure 1 (page 74). We welcomed Catherine Bradley to the Committee in July 2015, and her expertise in the international finance sector has further broadened our experience. Viability statement Following the changes made to the UK Corporate Governance Code (the Code) in 2014 by the Financial Reporting Council (the FRC), the Company is required to explain in the annual report how its longerterm prospects have been assessed and whether we have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of our assessment. This explanation has become known as the viability statement (page 37). Management has carried out modelling of various risk combinations and scenarios and their impact on the Group’s financial performance and its ability to operate. We have reviewed the analysis and testing to support the viability statement and are satisfied that a robust and thorough process has been followed. Risk management system and controls The Code has further implications in relation to our risk management systems and controls, stipulating that robust risk assessment should be carried out with greater transparency around the potential impact and management of our principal

risks. We consider our existing processes and policies provide a solid basis for meeting these requirements. We will continue to consider the Group’s risk management system and internal controls in light of these updated requirements and work with management to identify any gaps in our current processes and implement appropriate mitigation measures. External audit tender In our last report to you, we explained that we believed our long-term audit tender policy should be based on a holistic view of relevant guidance and regulations. A new audit partner from PricewaterhouseCoopers LLP (PwC) was appointed in June 2015 following the early retirement of the previous partner. We committed to conducting a full and competitive tender of the external audit contract during the financial year ended 31 March 2016, with the intention that a new independent auditor be appointed for the financial year ending 31 March 2018. We chose this timeframe to ensure an orderly transition from PwC to the new audit firm. Consequently, a resolution to reappoint PwC for the financial year ending 31 March 2017 will be put to shareholders at this year’s annual general meeting (AGM). The competitive tender process was an important area of focus for the Committee during the year. We commenced with a shareholder consultation in October 2015 and the process culminated in our recommendation to the Board that KPMG LLP (KPMG) be appointed as independent auditor for the financial year ending 31 March 2018. KPMG’s appointment will therefore be subject to shareholder approval at the 2017 AGM. More details on the tender process can be found in our report (page 77).

For more information about the Audit Committee (including its terms of reference), visit: www.atkinsglobal.com/investors_ accountability

The Committee would like to thank each firm that took part in the tender process and looks forward to working with PwC during its final year as independent auditor. Yours faithfully

Allister Langlands Chairman of the Audit Committee

GOVERNANCE

Dear Shareholder

9 October 2013 to date (from 1 February 2014) 1 July 2015 to date 1 April 2007 to date 8 September 2011 to date

15 June 2016

Our responsibilities include: • preparation for the annual financial reporting cycle • integrity and quality of the Group’s financial reporting • assisting the Board with the preparation of the viability and going concern statements • overview of internal and independent audit processes • development of internal audit plan, with particular focus on areas of potential risk and those areas of most importance to the delivery of the Group’s strategy and future performance • oversight and guidance to contribute to the continuing effectiveness and suitability of the Group’s internal controls • assurance that shareholders’ interests are properly protected by appropriate financial management, reporting and internal controls • whistleblowing arrangements • other matters in accordance with our terms of reference.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

Allister Langlands (chairman) Catherine Bradley Fiona Clutterbuck Raj Rajagopal

Details of Committee meeting attendance can be found in table 1 of the Corporate governance report (page 62).

INVESTOR INFORMATION

Audit Committee members

STRATEGIC REPORT

Letter from the Audit Committee chairman

74

Audit Committee report continued Figure 1: Committee activities During the year ended 31 March 2016, key matters considered included:

• Key judgemental issues regarding the half yearly results • Independent auditor's report in respect of the half yearly results • Draft half yearly results • Group control self-certification • Review of internal audit findings • Consideration of FRC consultation on enhancing confidence in audit • Independent audit tender • Committee effectiveness review • Whistleblower reporting November

Full year results and annual report preparation • Whistleblowing arrangements • Whistleblower reporting • Fraud response procedure • Group tax standards and treasury manual • Review of internal audit findings • Internal audit plan • Internal audit conflict management • Internal auditor effectiveness and fees • Group's internal audit charter • External auditor conflict management • Group control self-certification • Independent audit tender • March Report from the independent auditor • Viability statement preparation •

Committee activities • Half year results preparation • Senior accounting officer statement • Plan for independent audit review September for half year • Plan and engagement letter for independent audit for full year • Group control self-certification • Group insurance captive • Review of internal audit findings • Consideration of FRC practice aid on audit quality • Independent audit tender • Independent auditor effectiveness • Whistleblower reporting • Independent auditor fees

Key judgemental issues regarding • the full year results Fair, balanced and understandable • June determination for the annual report Independent auditor's report in respect • of the full year results Draft full year results and annual report • Financial internal controls and risk management • Audit and non-audit fees paid to the independent auditor • Reappointment of the independent auditor • Group control self-certification • Review of internal audit findings • Risk requirements of the Code • Independent audit tender • Information assurance controls • Whistleblower reporting •

The Committee discussed a number of matters following the conclusion of the financial year ended 31 March 2016 in respect of that year. These included: • judgemental issues regarding the Group’s results for the year ended 31 March 2016, including a review of accounting policies, viability statement and going concern • reviewing the preliminary statement and Annual Report for the year ended 31 March 2016 • advising the Board, at its request, on whether the Annual Report for the year ended 31 March 2016 is fair, balanced and understandable • independent auditor’s report in respect of the results for the year ended 31 March 2016 • approval of the Audit Committee report.

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75

Significant issues We have reviewed the key judgements applied to a number of significant issues in the preparation of the Financial Statements. Our review included consideration of the following:

Table 1: Significant issues

Judgements may include the level of revenue and profit recognition based on management’s estimates of the extent to which the Group has fulfilled its obligations under the contract and the level of costs that will be incurred to complete them.

Comments and conclusion

Regularly reviewed reports from management on a number of higher risk contracts including estimates of forecast project outturns, costs to complete and levels of revenue recognition.

We concluded that the approach to revenue recognition is appropriate in the context of the Group’s business model and contract structures.

Considered control self-assessment, internal audit and independent auditor reports.

Goodwill impairment: The Group has significant goodwill relating to: • The Atkins North America Holdings Corporation (formerly known as The PBSJ Corporation) and its subsidiaries (the ANA business) following the acquisition of The PBSJ Corporation in 2010 • our oil and gas business. The issue of impairment involves making significant judgements about the future results of both these businesses, the markets in which they operate, along with economic and cost of capital assumptions. In particular, market conditions in the oil and gas sector and the performance of our oil and gas business, as reported in the Energy business review, led to a closer review of the carrying value of goodwill in the oil and gas cash generating unit. The consideration of future results requires significant judgement by management.

Reviewed a preliminary goodwill impairment calculation undertaken as at 30 September 2015, using similar assumptions in relation to future cash flows as were used at 31 March 2015 to determine the existence, or otherwise, of any triggering events requiring a full impairment review. At 31 March 2016 a full impairment review was carried out using updated forecasts and assumptions, including testing of assumptions and sensitivity analysis. Discussed the appropriateness of the assumptions and challenged the factors used to consider whether a reasonable change in assumptions may indicate an impairment.

We agreed with management’s recommendation that no full impairment review was necessary at 30 September 2015 and that no charge should be made at 31 March 2016. However:

GOVERNANCE

There are potential uncertainties in determining the amounts to be recovered as a result of contractual variations due to, for example, changing client specifications or unforeseen circumstances.

How the Committee addressed this

• given its quantum, there remains a risk of impairment of goodwill in the ANA business in the future • given the ongoing challenging oil and gas market conditions, particularly in the UK and North America, there remains a risk of impairment of goodwill in the oil and gas business in the future

Received and considered independent auditor’s comments on key assumptions used and sensitivity analysis performed.

and appropriate disclosures have therefore been included in the Annual Report (note 15 to the Financial Statements (page 150)).

The assumptions applied by the Group to the Atkins Pension Plan and the RPS were reviewed as at 31 March 2016 in light of prevailing conditions and based on independent actuarial advice.

We agreed with the assumptions applied by management and with the valuation of the Group’s pension liabilities.

FINANCIAL STATEMENTS

Issue and significance Contract accounting/revenue recognition: The Group enters into a number of large and complex longterm contracts which can span a number of reporting periods. Significant judgements are required to forecast how each contract will perform over its lifetime.

STRATEGIC REPORT

Annual financial reporting

The Group has significant post-retirement liabilities via the Atkins Pension Plan and the Railways Pension Scheme (RPS). Valuation of net retirement plan liabilities requires significant levels of judgement and technical expertise to ensure the assumptions applied are appropriate, as relatively small changes can have a material impact on the size of the liabilities. The assumptions that have the biggest impact on pension liabilities are the discount and inflation rates applied, along with the increase in salaries and life expectancy.

Considered the independent auditor's report on the appropriateness of the assumptions.

Taxation: The Group operates under multiple and varied tax regimes. The completeness and valuation of provisions to cover the range of potential final determinations by the tax authorities of the Group’s tax positions are the subject of judgement.

The provisions held by the Group, and the independent auditor's comments on these provisions, were reviewed by the Committee as at 31 March 2016.

Judgement is required in relation to deferred tax assets, current tax deductions and ongoing tax audits.

Reviewed the breakdown of provisions and considered the application of tax rules in different jurisdictions.

We agreed with management’s assessment of the Group’s tax provisions.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Pension liabilities:

76

Audit Committee report continued Issue and significance

How the Committee addressed this

Comments and conclusion

The size of the provision held against any particular claim is determined by management and reviewed by the Committee, based on its knowledge of the specifics of the claim, and therefore is inherently judgemental and may change over time as new information comes to light.

We agreed with management’s recommendations regarding the level of claims’ provisions carried by the Group.

Professional indemnity provisions: Due to the nature of the work we undertake for clients, there is a risk of claims against our professional indemnity insurance. The Group manages a significant proportion of its professional indemnity claims through its insurance captive in Guernsey. Most significant claims relate to perceived deficiencies in work performed by the Group.

Reviewed captive insurance arrangements. Considered the independent auditor's report with regard to professional indemnity provisions.

We also considered a number of other judgements made by management, including those in respect of accounting for acquisitions, disposals and acquired intangibles, exceptional items, appropriateness of accounting policies, useful economic life of intangible assets and post-balance sheet events. Fair, balanced and understandable The content and disclosures made in the Annual Report are subject to a verification exercise by management to ensure that no statement is misleading in the form and context in which it is included, no material facts are omitted which may make any statement of fact or opinion misleading, and implications which might be reasonably drawn from the statement are true. The Committee examined the Annual Report and was asked by the Board to advise it on whether it was fair, balanced and understandable. In order for us to draw our conclusions in this respect, we: • examined the preparation and review process for the Annual Report and considered the level of challenge provided through that process • assessed whether, from our own review of the Annual Report, we concurred with the results of that process • considered the accounting policies applied by the Group • assessed the information contained in the Annual Report against the Group’s strategy and business model to ensure the information provided was sufficient to enable shareholders to assess the Group’s performance. Following our review, we advised the Board that the Annual Report of the Company for the financial year ended 31 March 2016, taken as a whole, is fair, balanced and understandable and gives shareholders the information necessary for them to assess the Group’s position and performance, strategy and business model.

Independent auditor The independent auditor is currently PwC, which has acted in this capacity since the Company listed on the London Stock Exchange in 1996. During the year, we updated our approach to reviewing the effectiveness of the audit process in accordance with new guidance issued by the FRC. The Committee carried out a formal review of the effectiveness of the independent auditor which included an evaluation of the qualification of the auditor, its expertise and the effectiveness and quality of the audit. As part of our review, a questionnaire was circulated to the members of the Committee and senior management following the publication of the Annual Report for the year ended 31 March 2015. The recipients were asked to answer questions which focused on the robustness of the audit process, the quality of delivery of audit services, the quality of the audit reporting and the quality of the people and services. We took the responses to the questionnaire into account when considering the strategy and preparation of the audit for the financial year ended 31 March 2016. We intend to develop the questionnaire further next year by widening the group of employees whose views will be sought. There were no significant findings arising from the review and we concluded that, overall, both PwC and its audit process continued to be effective. Areas where the Committee believed that the independent audit process might be improved focused on the provision of more details of the audit techniques used and increased disclosure on how the feedback regarding the effectiveness of the audit process has been acted upon. These areas were discussed and agreed with PwC and are being addressed. The independence of the independent auditor is evidenced in part through its challenge to management. The rotation of the audit partner on a regular basis also contributes to the independence and objectivity of the audit process, the last such rotation having taken place in June 2015 on the early retirement of the previous audit partner.

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77

Audit tender Background During the year, we conducted a tender in satisfaction of the Code requirement for FTSE 350 companies to put the independent audit contract out to tender at least once every 10 years. Audit tender process and conclusion A rigorous competitive tender process was initiated by the Committee and led by the chairman of the Committee. Representatives from Group finance and Group tax and treasury, along with the company secretary, also supported the selection process.

STRATEGIC REPORT

Governance > Audit Committee report

For Ernst & Young (EY) to tender for the independent audit contract, it would have been required to cease its appointment as our internal auditor. It was therefore decided during the planning phase that, as we did not wish to tender the contract for internal audit services at this point, EY would not participate in the tender for the independent audit contract. PwC did not participate beyond the pre-qualification stage of the tender process given its length of tenure as incumbent independent auditor. Figure 2 shows the key steps we undertook during the competitive tender process along with details of the objective criteria used to assess the participants in the process. Throughout the tender process, our primary focus was on audit quality.

Shareholder engagement

Objective criteria

Planning phase June – September 2015 • Timetable prepared • Initial planning activities and review of the market

Primary focus • Audit quality, including analysis of FRC’s audit quality review

• Shareholder consultation

Execution phase

Updates and feedback provided to members of the Committee at regular intervals throughout the process

Additional considerations: Consultation October – November 2015 • Shareholder letters • Shareholder meetings

• Number of parties reduced based on objective review of PQQ responses; request for proposal issued to remaining bidding parties

• Appropriate team structure with the right experience, commitment and enthusiasm • Clarity of approach

• Structured management meetings with bidding parties

• Use of technology and innovation

• Presentations from final bidding parties to selection panel

March 2016 • Recommendation proposed to the Committee and then the Board • Final decision taken by the Board

• Ability to meet independence requirements • Coverage and integration of the firms across Atkins’ international locations

• Preparation of materials for bidding parties

Decision

• Depth of business and industry knowledge

FINANCIAL STATEMENTS

September 2015 – February 2016 • Pre-qualification questionnaires (PQQ) issued, following a desktop review of the market, to five chosen parties, including two ‘midtier’ firms

• Our experience with the potential firms

Feedback March 2016 • Shareholder letters • Shareholder meetings (where requested)

• Our relevance and importance as a client to the various firms • Total cost of auditing services

• Announcement of decision to shareholders

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Process

GOVERNANCE

Figure 2: Independent audit tender process and objective criteria

78

Audit Committee report continued Legislation due to come into effect on 17 June 2016 stipulates that two candidates should be recommended for the position of independent auditor following a competitive tender process, with a clear preference indicated for one of those two candidates. Given the appointment of KPMG will be for the financial year ending 31 March 2018 and will not be proposed to shareholders until the AGM in 2017, this legislation applies to our recommendation. As required, we therefore recommended two candidates to the Board, clearly stating a preference that KPMG be appointed as the independent auditor for the financial year ending 31 March 2018. Our decision was made without any influence from a third party and the Company was not subject to any contractual provision that restricted its choice of independent auditor. The Committee confirms that the Company complied with the provision of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 for the financial year under review. Auditor independence The Committee recognises that there are occasions where 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. Our approach is intended to preserve the independence and objectivity of the independent auditor and is reviewed and approved annually by the Committee. Details of our processes for considering and approving such work, prior to it commencing, are summarised in table 2. In April 2016, the FRC issued a final draft of its proposed Ethical Standard for Auditors (the ESA), which will implement new restrictions on the supply of non-audit services, required by EU legislation. The restrictions will apply from our financial year commencing 1 April 2017. In light of the ESA, ahead of the next financial year, we intend to review our existing approach to using the independent auditor for non-audit engagements.

Table 2: Current approach adopted regarding non-audit services provided by the independent auditor

Audit related services Examples of types of work

• Regulatory work • Reporting accountants to a share or bond issue or other shareholder circulars • Auditing of share schemes • Independent review of the half yearly report

Approval required

Work performed by the independent auditor as a result of its unique position and knowledge of the Company

Other work/circumstances

• Due diligence on large scale acquisition opportunities

• Management must identify independent • Executive management (via the Group finance director auditor as the best supplier in a specific field and company secretary) has delegated authority to use the and believe assignment will not prejudice independent auditor without prior consultation with the auditor independence Committee • Chairman of the Committee consulted where executive management has concerns over auditor independence • Nature of, and fees associated with, that work regularly reported to the Committee

• Evaluated request made to the Committee • Appointments for non-material fee levels may be approved by Group finance director (or company secretary in his absence) • Executive management (via Group finance director and company secretary) has delegated authority to approve working with the independent auditor on commercial arrangements/contracts with third parties up to a specified value, above which the approval of the Committee chairman is required • Policy of not employing a former partner within two years of audit involvement • Committee and Group finance director will consider employment of non-partners on an individual basis

• Independent auditor must approve any such engagement before it can proceed

WS Atkins plc Annual Report 2016

Prohibited work

• Taxation advice including compliance • Provision of non-material systems or project • Book-keeping services services under the control of a Group project • Assisting and working with the manager • Other services internal audit function deemed to be • Internal audit services under the • Secondment of staff other than to prepare incompatible accounting records or financial statements instruction of the internal audit with auditor • Systems recommendation and function independence implementation • Valuation services not material by professional • Employment of former partners and nonto the financial statements (and or governmental partners of independent auditor where there is not a high degree regulations of subjectivity)

n/a

Governance > Audit Committee report

79

32.64%

34.11%

2015

38.91%

26.62%

£m 0

1

Audit and audit related services

33.25%

31.62%

2

2.85%

3

Taxation compliance services

S ervices in connection with an unsuccessful acquisition pursuit

Taxation advisory services

Other non-audit services

4

5

Figure 3 and note 5 to the Financial Statements (page 141) set out the fees paid to the independent auditor for audit and non-audit work. Management and the Committee considered carefully which advisors were best-placed to provide taxation compliance and advisory services to the Group in light of the audit tender conducted during the year and in anticipation that these restrictions would exclude the provision of tax services by the new auditor. In choosing advisors, we sought to ensure that:

GOVERNANCE

2016

STRATEGIC REPORT

Figure 3: Fees for audit and non-audit work paid to the independent auditor

• our choice of independent auditor was not restricted, and the independence of other audit firms was not compromised, during the final stages of the audit tender • the chosen advisor was able to support the full international scope of the services we required • any appointment could be made for the medium to long term. We therefore considered it appropriate to engage PwC to provide taxation compliance and advisory services in light of its:

• detailed understanding of the Group • specialist expertise in these areas • likely resignation as independent auditor after the conclusion of the audit for the year ending 31 March 2017, given its long tenure. Approximately 64% of the taxation compliance services was provided by PwC in relation to our internationally mobile employees. This work supports our drive to increase the mobility and international experience of our people and grow our business outside the UK. PwC's appointment was made following a competitive tender process. Advice provided by PwC in connection with successful acquisition pursuits represented approximately 47% of the taxation advisory services fees.

FINANCIAL STATEMENTS

• global reach in countries where the Group has existing operations and where it plans further expansion

We carefully considered our own approach to ensuring PwC’s independence, as set out in table 2 (page 78), before proceeding with the appointment for non-audit services. In addition, we also sought PwC’s own determination of its independence, including the safeguards in place. We concluded that the non-audit services provided by PwC did not have any impact on its independence.

INVESTOR INFORMATION

Approved by the Board and signed on its behalf by

Allister Langlands Chairman of the Audit Committee 15 June 2016

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Remuneration report

Letter from the Remuneration Committee chairman Remuneration Committee members Fiona Clutterbuck 15 June 2009 to date (acting chairman) (from 14 June 2016) Allister Langlands 1 July 2015 to date Thomas Leppert 31 July 2014 to date Raj Rajagopal 1 March 2009 to date (chairman from 8 September 2011 to 14 June 2016) Gretchen Watkins 1 June 2016 to date

Dear Shareholder Following my appointment as acting chairman of the Remuneration Committee from 14 June 2016, I am pleased to present this year’s remuneration report. My fellow Committee members and I would like to thank Raj Rajagopal, who remains a member of the Committee but has stepped down as chairman, for his excellent stewardship since 2011. This year’s report is split into three sections: (1) this letter, my annual statement, in which I summarise major decisions taken on, and any substantial changes to, remuneration during the year, including the context for such decisions and changes (2) Directors’ remuneration policy which sets out the Company’s proposed forward-looking policy on remuneration (3) Annual remuneration report outlining the Company’s implementation of existing remuneration policy for the financial year ended 31 March 2016 and a statement on implementation of the proposed policy for the year ending 31 March 2017. I trust you will find these sections comprehensive, demonstrating the clear link between directors’ remuneration and delivery of our strategy. Paying for performance Atkins delivered a strong performance during the year, increasing revenue by 6% to £1.86bn and underlying operating profit by 10.5%, achieving the Group's 8% underlying operating margin target set in 2011, and recommending an 8.2% increase in full year dividend. As outlined by Allan Cook, this was achieved against

WS Atkins plc Annual Report 2016

the backdrop of an increasingly challenging macroeconomic enviornment. Bonus 2015/16 (tables 10 and 11 (pages 97 and 98)) The Company’s Executive Bonus Scheme (EBS) rewards executive directors for delivery of stretching annual Group profit after tax, cash conversion and key strategic targets. The relative weighting of each target is 50%, 25% and 25% respectively. Management delivered the strong financial performance as reflected in reported profitability, which was above the challenging budget target it had been set but fell short of its stretch target. The Group profit after tax element of annual bonus will therefore result in a payment of 62% of the maximum opportunity. Profit growth was supported by very good cash performance, which exceeded the stretch target and resulted in the maximum payout for this component of the EBS. The Committee considered in detail the excellent performance of each of the executive directors against their strategic objectives for the year, full details of which are contained in the Annual remuneration report (page 97). Bonus payments to the executive directors were between 76.0% and 79.8% of their maximum opportunities. 2013 LTIP and 2012 LGU vesting (table 13 (page 100)) Underlying diluted EPS growth for the three-year period to 31 March 2016 was 23.3%. This resulted in 48% of the WS Atkins plc Long Term Incentive Plan (LTIP) awards granted in 2013 vesting. The first tranche of awards made in 2012 under the terms of the WS Atkins plc Long-term Growth Unit plan (LGU) also vested following determination that the strategic measures set at the time of award had been satisfied. The Committee is satisfied that bonus

Details of Committee meeting attendance can be found in table 1 of the Corporate governance report (page 62). For more information about the Remuneration Committee (including its terms of reference) visit: www.atkinsglobal.com/investors_ remuneration

payments and LTIP and LGU vesting reflect the level of financial and operational performance delivered by the Company. Shareholder dialogue and policy review I am pleased that, last year, 93% (2014: 91%) of our shareholders voted in favour of our Annual remuneration report, which was based on the Company’s approved existing remuneration policy. This policy was adopted in 2012 following a comprehensive review which coincided with the appointment of Uwe Krueger as CEO in 2011. Although the Committee believes that, to date, our remuneration framework has created a clear link between the performance of the Group and strategic delivery, the creation of shareholder value and the remuneration of our executive directors, we determined it was appropriate to look again at the Company’s remuneration policy. This review was in response to the ongoing evolution of the Group and its strategy and the wider industry, evolving best practice in remuneration design and our desire to ensure that the Company’s long-term incentives remain appropriate for the future. In undertaking our review the Committee also sought to ensure that our proposed changes continue to be in line with our established remuneration framework principles. These are to: • deliver our strategy and shareholder value: reward the successful delivery of our business strategy (page 10) and link remuneration with the value created for shareholders • reward performance: ensure a significant proportion of executive directors’ remuneration is performance-related, providing the right balance between short- and long-term incentives, and delivered in the form of Atkins shares

• pay no more than necessary: reward executive directors for delivering shareholder value and our strategy while ensuring that the Company pays no more than is necessary. In formulating our proposals, the Committee also sought to address feedback from some shareholders about the performance measures attached to the LGU. Following our comprehensive review and consultation with the Company’s major shareholders, Institutional Shareholder Services (ISS) and the Investment Association we propose to: • move to a simpler structure which revises the existing LTIP and ceases to operate the LGU • continue to link LTIP vesting to EPS growth (75% weighting) in addition to a new long-term cash conversion performance metric (25% weighting), which together provide objective, transparent financial performance measures that align to the value created for shareholders • increase LTIP award levels (150% for CEO and Group finance director, 125% for Group HR director), which is offset by the cessation of the LGU • improve long-term alignment to shareholder interests and evolving best practice by introducing two-year post-vesting holding periods for LTIP awards and increasing shareholding guidelines for executive directors • amend the cash metric for the bonus scheme from cash conversion to one based on lock-up days to differentiate further from the new long-term cash performance measure in the LTIP and provide clear focus on working capital management • retain malus and clawback provisions.

The quantum of the Company’s long-term incentive opportunities has been unchanged since 2005. Over this period the business has grown considerably in both value and complexity. Revenue grew from £955m in 2004/05 to £1,757m in 2014/15 and £100 invested in Atkins shares in January 2005 would have been worth £270 (dividends reinvested) as at 31 March 2016. The consistency in award levels over this period reflects the Committee’s desire not to contribute to further executive pay inflation. However, the existing long-term incentive opportunities and the value of total remuneration are now substantially below the appropriate level given Atkins’ scale and complexity. This poses both a retention and a recruitment risk. The Committee therefore proposes to increase the maximum LTIP opportunity to between lower quartile and median of UK-listed companies of comparable size and complexity while removing the LGU. The Committee does not plan to make any other changes to the quantum of total remuneration, other than salary increases in line with the workforce as a whole. Overall, we believe that the proposed changes increase transparency and simplicity and alignment to long-term performance. In response to the feedback we received during the shareholder consultation process we made two key adjustments to our original proposals. These were to increase the shareholding guidelines for executive directors to 200% of salary above our original proposal to align the guideline to the new LTIP award levels and to change the cash measure for the annual bonus to one based on lock-up days to differentiate it further from the LTIP cash conversion measure (page 102) and provide clear focus on working capital management.

The Committee and I firmly believe that the changes to the remuneration policy are in the best interests of the shareholders and support the Company’s business strategy. I have no hesitation in recommending it to you and look forward to receiving your continued support at the AGM on 2 August 2016. Yours faithfully

STRATEGIC REPORT

Due to the proposed changes, a new remuneration policy will be presented to shareholders for approval at the annual general meeting (AGM) to be held on 2 August 2016. If approved, the Committee expects the new policy, which will replace the existing policy, to remain in place for the next three years. The changes to the policy are summarised in table 1 (page 82) followed by the new remuneration policy itself (pages 82 to 93).

Fiona Clutterbuck Acting chairman of the Remuneration Committee 15 June 2016

Our responsibilities include: • setting and implementing remuneration policy for the chairman, executive directors and company secretary • shaping and reviewing the Company’s short- and long-term incentive arrangements and setting performance targets

FINANCIAL STATEMENTS

• be simple and transparent: ensure the policy is based on simple principles, provides participants with a clear line of sight to performance metrics and aligns executive remuneration with shareholder interests and business results (page 02)

The Committee considered whether the revised LTIP should include a total shareholder return (TSR) performance metric. Independent analysis supported the Committee's view that TSR is not an appropriate performance metric for the Company. This is partly due to the difficulty in determining a robust TSR comparator group given the lack of suitable listed peers. This analysis also confirmed that EPS and long-term cash conversion were the most appropriate performance measures for the Group.

• establishing and reviewing the policy for remuneration on termination to ensure the Company does not reward failure • setting the executive directors’ and company secretary's total remuneration package • setting the chairman’s annual fee • overseeing the pay and conditions throughout the Group • selecting, appointing and setting the terms of reference for any remuneration consultants that advise the Committee.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

• incentivise talent: recognise that Atkins is a people business, where reward and incentive structures are critical to enable us to attract, retain, incentivise and reward the best global talent

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GOVERNANCE

Governance > Remuneration report

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Remuneration report

Directors’ remuneration policy The Company’s remuneration policy was approved by shareholders at the AGM held on 30 July 2014. A copy of the Company’s existing policy can be found on our investor relations website: www.atkinsglobal.com/investors_remuneration. As highlighted in the annual statement by the Remuneration Committee, the Committee reviewed executive remuneration arrangements during the year and is proposing a new remuneration policy be presented to shareholders for approval in a binding vote at the AGM on 2 August 2016. The policy, subject to receiving shareholder approval, will operate from the date of approval and is intended to remain applicable to the following three years. The new remuneration policy has been prepared and developed: • in accordance with the principles of the UK Corporate Governance Code (the Code) • taking into account the guidelines issued by the Investment Association, ISS and other shareholder representative bodies • after consultation with the Company’s major shareholders, the Investment Association and ISS. It is presented on the basis prescribed in the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the Regulations). Comprehensive detail in respect of how the existing remuneration policy has been implemented for the financial year ended 31 March 2016 and how the new remuneration policy is intended to be implemented for the year ahead is provided in the Annual remuneration report (pages 94 to 111).

Summary of changes to the remuneration policy from previous policy Following the review of executive directors’ remuneration during the year, changes to the remuneration policy are proposed. Table 1 summarises the key changes when compared with the existing policy previously approved by shareholders at the 2014 AGM.

Table 1: Summary of changes to the remuneration policy Policy element Existing policy

Proposed change to policy

Rationale for change

Long-term incentives

Revised LTIP is intended to have two performance conditions:

Simplifies long-term incentive structure and reflects evolving best practice in remuneration design.

Executive directors granted: • a 75% of salary LTIP award which vests after three years subject to a single EPS condition • a 50% of salary LGU award which vests in three equal tranches on the fourth, fifth and sixth anniversaries of the grant date, subject to an underpin that considered progress against strategy.

• EPS (75% weighting) • cash conversion (25% weighting). Award levels will be as follows: • CEO and Group finance director – 150% of salary • Group HR director – 125% of salary. A holding period will be applied after the initial three-year vesting period such that the combined vesting and holding period is at least five years. No LGU awards will be granted.

Supports long-term alignment of executive remuneration with shareholders’ interests. Incentivises both longer term profit and cash performance. Creates a more market-competitive package and strengthens the Company's ability to retain and attract the best global executive level talent.

Malus and clawback

Malus provisions applied to the Company’s short- and long-term incentives.

With effect from 1 April 2015, clawback provisions were also introduced to each performance‑related remuneration element in line with requirements set out in the Code. These existing provisions have been incorporated in the proposed new remuneration policy.

The Committee believes it is appropriate to have the power to withhold and clawback payments in certain circumstances.

Shareholding guidelines

Requirement to build a significant interest in the Company’s shares equivalent to 100% of basic salary within a five-year period.

Required holding will be increased to 200% of basic salary.

Provides greater alignment of executive directors’ interests with shareholders' interests. Encourages significant Company share ownership by executives. Reflects shareholder feedback.

WS Atkins plc Annual Report 2016

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The main elements of remuneration for the executive directors are: Fixed pay:

salary, pension and benefits

Short-term incentives: EBS Long-term incentives: revised LTIP which, subject to shareholder approval, will replace awards currently granted under the LTIP and the LGU.

STRATEGIC REPORT

Overview of our remuneration framework

The timetable for the operation of each element is summarised in figure 1, with further information on each element provided in the policy table (table 2 (page 84)).

Figure 1: Timeline for receipt of remuneration

Salary

100% cash

Benefits

Cash allowance and/or benefit in kind

Pension

Pension contribution or cash in lieu

Bonus (cash)1

Current year performance assessed

Bonus (deferred shares)2 LTIP2

Y + 1 year

Y + 2 years

Y + 3 years

Y + 4 years

Y + 5 years

GOVERNANCE

Current year (Y)

2/3 paid in cash

1/3 paid in shares deferred for three years

After three-year performance period awards vest (based on performance)

Deferred shares vest

Further two-year holding period

Shares released

Timeframe in which malus and clawback provisions can be applied:

INVESTOR INFORMATION

1. The Committee has the discretion to apply malus provisions up until the date the cash bonus is paid. After this date, the Committee has the discretion to apply clawback provisions within the next two years. 2. The Committee has the discretion to apply malus provisions up until the date the share award vests. After this date, the Committee has the discretion to apply clawback provisions within the next two years.

FINANCIAL STATEMENTS

Element of remuneration

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Remuneration report

Directors’ remuneration policy continued Future policy for executive directors Table 2: Future policy table for executive directors FIXED PAY Remuneration element

Purpose and link to our strategy

Base salary

To provide a market-competitive salary to recruit and retain individuals with the skills and experience necessary to deliver the Company’s strategic objectives.

Operation

Maximum opportunity

Paid monthly in arrears in cash.

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.

Normally 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.

Benefits

To provide a market-competitive remuneration package in a cost effective way.

Performance framework

When determining salary increases the Committee considers Company and individual performance.

2016/17

Executive directors received the following increases with effect from 1 April 2015:

All executive directors have received a 1.5% increase with effect from 1 April 2016.

The 1.5% increase is below the Heath Drewett – average salary increase for all 2.9% employees of Uwe Krueger – 2.4%. 2.9% James Cullens – 2.8%

Each increase was below the average salary increase for all employees of 3.3%.

In the event of the promotion of an existing executive director, for example the Group finance director becoming CEO, the salary increase of the relevant executive director will not normally exceed the salary of the outgoing director holding that office.

Benefits, which are subject to regular review The Committee reserves the power to deliver benefits to ensure competiveness, include: which, in aggregate, have • an annual cash car allowance or car a cost of 25% of salary. • flexible benefit scheme In certain circumstances it may be necessary to exceed • life assurance entitlement ranging this limit, including (but not between four and seven times salary limited to) where there are (although this can be increased at the changes in the underlying executive's own personal cost via flexible benefits provided to the benefit scheme in line with provisions for wider workforce, changes the wider workforce) • private medical insurance or an allowance to benefit providers and changes in individual for executive directors and their families circumstances (such as • medical assessments relocation). • income protection in the event that an executive is unable to work due to long-term ill health

Implementation 2015/16

Not applicable

Taxable benefits to all executive directors principally comprise of a car allowance and medical insurance/ healthcare allowance.

James Cullens and Heath Drewett are expected to receive the same types of benefits as provided in 2015/16.

All executive directors received a cash allowance equivalent to 25% of salary.

It is anticipated that all executive directors will continue to receive a cash allowance equivalent to 25% of salary.

Uwe Krueger’s allowance for In addition, Uwe travel expenses Krueger receives expired on an allowance for 13 June 2016. travel expenses Uwe Krueger’s incurred other benefits between his are expected to home and the remain similar to UK during the those provided first five years in 2015/16. following his appointment. He also receives an allowance for professional advice.

• personal accident cover while on business • travel allowances and expense reimbursement • professional advice • professional subscriptions • purchase/sale of annual leave entitlements in line with policy for the wider workforce • reimbursement of taxable expenses incurred on Company matters. In the event of an executive being located outside the UK, additional benefits may be provided in line with local practice. No recovery provisions apply to benefits. Pension

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.

The maximum Company contribution is 25% of base salary.

No recovery provisions apply to pension.

The Committee may change the directors’ pension arrangements in response to new legislation or regulations provided that any changes are cost-neutral.

WS Atkins plc Annual Report 2016

Not applicable

VARIABLE PAY Implementation

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.

An annual bonus scheme with measures and performance targets set by the Committee at the beginning of each financial year. Payout determined after year end following the Committee's assessment of performance relative to targets and objectives.

The maximum annual bonus opportunity is 125% of base salary for the CEO and 100% of base salary for other executive directors. Base salary is the average salary paid to the executive director for the bonus year.

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).

The Committee has the flexibility to increase the overall maximum bonus level to 150% of salary for the CEO and 125% for other executive directors, subject to this not being above the competitive market range.

For the financial metrics, threshold and budgeted performance normally delivers 12.5% and 50% of the maximum opportunity respectively.

The Committee would consult with the Company’s major shareholders in advance of any increase in maximum 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.

Two thirds of the bonus is normally paid in cash and one third is normally deferred into shares over at least three years, subject to continued employment. The deferral into shares is normally 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 may be paid in cash or shares following the vesting and exercise of the nil-cost share option. Annual bonuses do not form part of pensionable earnings and are non-contractual. The cash payment and deferred shares are subject to both malus and clawback provisions in certain circumstances (as set out in the notes to the policy table). Malus provisions allow the Committee to reduce the award before a bonus cash payment is made or a deferred share award vests. Clawback provisions allow the Committee to reclaim some or all of the value of a bonus cash payment or a vested share award within two years of a cash bonus payment being made or a deferred share award vesting.

2015/16

2016/17

Group profit after tax (50%):

Following the shareholder consultation, the cash measure has been amended from cash conversion to one based on lock-up days.

62% of maximum achieved Group cash conversion (25%): 100% of maximum achieved Personal objectives (25%):

Otherwise the Committee intends that the 2016/17 EBS will operate on the same basis as 2015/16.

Executive directors achieved between 80% – 95% of maximum Overall: Executive directors’ payouts were between 76.0% – 79.8% of their maximum bonus opportunity Malus and clawback provisions apply to these payments.

In assessing the formulaic outcomes of targets, the Committee can make adjustments to ensure that any resulting payment is fair to both the executive directors and investors, including the ability to make no payment if deemed appropriate. The Committee may reduce the amounts paid if there has been a material quality, safety or environmental failure.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

Purpose and link to our strategy

INVESTOR INFORMATION

Remuneration element

STRATEGIC REPORT

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GOVERNANCE

Governance > Remuneration report

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Remuneration report

Directors’ remuneration policy continued VARIABLE PAY continued Remuneration element

Long Term Incentive Plan (LTIP)

Purpose and link to our strategy

To incentivise and reward the creation of long-term shareholder value based on the delivery of stretching performance targets.

Implementation Operation

The Committee may grant an annual award which vests after at least three years, conditional upon performance and continued employment. After the vesting period, an additional holding period will apply, such that the combined vesting and holding period is at least five years. Awards will normally be granted in the form of 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 may accrue and are payable in cash or shares following the vesting and exercise of the nil-cost share option. Awards are subject to malus and clawback provisions in certain circumstances (as set out in the notes to the policy table). Malus provisions allow the Committee to reduce the award before it vests. Clawback provisions allow the Committee to reclaim some or all of the value at any time within two years following the vesting of LTIP awards.

Maximum opportunity

The maximum annual award limit is 200% of salary. It is normally expected that awards will be granted to executive directors as follows: CEO: 150% of salary Group finance director: 150% of salary Group HR director: 125% of salary.

Performance framework

2015/16

In 2015/16 Awards vest subject to Company performance and continued employment. executive directors were The intention is to use two performance granted a 75% measures, although the Committee of base salary reserves the right to revise the measures or the relative weighting where business LTIP award and a 50% LGU award. strategy or external circumstances requires this. Any substanital change would be subject to shareholder consultation. The two performance measures are: (i) EPS growth (75%) Underlying diluted EPS growth is the primary metric for measuring the delivery of our growth objective over the medium and long term. (ii) Cash conversion (25%) Long-term cash flow is a key strategic measure, essential for the delivery of the Company’s progressive dividend policy and to underpin growth, both organic and through value-enhancing acquisitions. Cash flow also provides a good performance link with the operational excellence pillar of our strategy which is focused on the “quality of earnings”.

Full details of the performance conditions, including targets, for these awards (LTIP – 100% EPS; LGU – progress against strategy underpin) are set out in the Annual remuneration report (page 100). Malus and clawback provisions apply to these awards.

2016/17

The proposed 2016/17 LTIP award levels are: James Cullens – 125% of salary Heath Drewett – 150% of salary Uwe Krueger – 150% of salary The proposed performance targets and vesting percentages for these awards are set out in table 16 (page 102). Malus and clawback provisions will apply to these awards.

It is expected that threshold performance will result in up to 25% vesting with straight-line vesting between threshold and maximum performance. In determining the level of vesting, the Committee will give consideration to: (i) the impact of any significant acquisitions or disposals in the performance period (ii) for EPS growth, the impact of inflation during the performance period, if it deems that this has had a significant impact on the level of challenge presented by the targets (iii) for cash conversion, the overall level of business performance. In considering these factors the Committee may reduce the level of vesting.

All-employee To encourage share plans share ownership across the organisation.

Executive directors can participate in the Share Incentive Plan (SIP) and a Save As You Earn Plan (or equivalent global plans) to the extent that such plans are operated for the wider workforce. No recovery provisions apply to awards granted under any of the Company's all-employee share plans.

WS Atkins plc Annual Report 2016

Not applicable. Executive directors will be subject to the same maximums in place for all employees participating in the relevant plan or plans.

The Company offered a SIP in 2015/16. All executive directors participated in the SIP in 2015/16.

The Company will continue to offer a SIP in 2016/17. All executive directors currently participate in the SIP.

87

Additional notes to the future policy table Malus and clawback provisions under incentive arrangements Awards under the EBS and LTIP are subject to both malus and clawback provisions. The malus provisions 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

STRATEGIC REPORT

Governance > Remuneration report

• serious reputational damage suffered by the Company • the executive director’s misconduct. In addition, the Committee has the ability to clawback EBS and LTIP awards in the following circumstances: • a material misstatement of the Company’s audited results • the executive director’s gross misconduct.

• reducing the amount of any future bonus that would otherwise be payable • reducing the extent to which any subsisting awards under the Atkins Deferred Share Plan, LTIP or LGU vest • requiring the relevant individual to pay the amount of clawback to the Company. 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 any remuneration policy in place at the time of grant, the terms of those plans (as originally applied at grant or subsequently amended) and the relevant performance conditions being achieved. For the avoidance of doubt, the performance framework for LGU awards as set out in the existing remuneration policy will continue to apply until the date on which the final tranche of LGU awards granted in 2015 vests (25 June 2021).

GOVERNANCE

If clawback is applied, the Committee retains the discretion to decide how clawback will be satisfied, including (but not limited to):

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 budget and strategic plan and are reviewed annually to ensure they are sufficiently stretching. In determining 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 normally be disclosed in the Annual remuneration report provided the Committee determines that the information is not considered commercially sensitive. In practice it is anticipated that EBS targets may 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, which will normally be in the Annual report for the year to which they are applied. LTIP targets will be disclosed in the Annual remuneration report prior to grant if determined at that time or, if not, in the first report following grant.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Selection of performance measures and target setting The Committee selects performance measures and weightings and sets targets annually to ensure continuing alignment with the strategic priorities of the Group. Any significant departure from the normal operation of the policy would be discussed in advance with our major shareholders.

FINANCIAL STATEMENTS

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 provisions. These powers, as set out in the rules of the plans, will continue to apply.

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Remuneration report

Directors’ remuneration policy continued Share ownership guidelines The Company’s shareholding guidelines seek to strengthen further alignment of the executive directors with our shareholders. Executive directors are expected to build up a significant interest in the Company’s shares equivalent to 200% of their individual salaries. The value of the executive directors’ shareholding is based on the value of the 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 but unexercised shares awarded under a Company share plan, net of tax. Executive directors are expected to meet the increased guideline within a five-year period from the date the remuneration policy is approved by shareholders or, if later, the date of their appointment to the Board. The Committee may vary the length of the period within which the shareholding may be acquired.

Illustration of the sensitivity of the remuneration package to performance The following charts illustrate the packages for the executive directors, 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 3.

Table 3: 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 and LTIP award payable at 50% of maximum award.

Stretch

Fixed pay comprising salary, benefits and pension. Annual bonus and LTIP award payable at maximum level.

Salary and pension are based on levels to be implemented in the financial year ending 31 March 2017; benefits are based on the actual value level delivered in the year ended 31 March 2016. The performance scenario charts exclude the impact of share price growth and any potential dividend accrual.

Figure 2: Executive directors' remuneration package James Cullens £000

Stretch

37%

28%

Target

54%

20%

100%

£367

Minimum

35% 26%

£1,001

£684

Heath Drewett £000

Stretch

34%

26%

Target

51%

20%

100%

£468

Minimum

40% 29%

£1,374

£921

Uwe Krueger £000

£000

Stretch

33%

30%

Target

49%

23%

100%

£816

Minimum

37% 28%

£2,499

£1,657

Fixed pay Annual bonus Long-term incentives

Other remuneration policies relating to executive directors 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.

WS Atkins plc Annual Report 2016

The remuneration of a new executive director will include all elements set out in the future policy table (table 2 (page 84)), namely salary, benefits, pension, participation in the EBS and LTIP. 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 2 (page 84)) 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 remuneration forgone, any performance targets (and whether they are likely to be achieved) and the timescale over which the forfeited remuneration would have been received. 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 9.4.2 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 normally 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. 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, while 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).

STRATEGIC REPORT

89

GOVERNANCE

Governance > Remuneration report

Executive directors’ contracts The service agreements of executive directors who served during the year are summarised in table 4.

Notice period (months)

Contract date

Effective date of contract

Unexpired term of contract

12

26 February 2014

1 July 2014

Rolling contract

Heath Drewett

12

17 April 2009

15 June 2009

Rolling contract

Uwe Krueger

12

1 June 2011

14 June 2011

Rolling contract

James Cullens

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. Termination policy for executive directors In line with current market practice, the executive directors have rolling service contracts which are terminable on 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 initially with it reducing on a rolling basis to 12 months within two years of appointment.

FINANCIAL STATEMENTS

Table 4: Executive directors’ service agreements

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 an annual bonus. Depending on the circumstances, the Committee has the discretion to make a pro rata bonus payment, linked to the original performance standards and delivered entirely in cash. The executive directors’ entitlements to any bonus and unvested share awards granted in connection with the EBS or under the terms of the LTIP will be treated in accordance with the terms of the relevant plan rules, summarised in table 5 (page 90).

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

No service agreement provides for predetermined amounts of compensation in the event of early termination of service contracts or a change in control.

90

Remuneration report

Directors’ remuneration policy continued Table 5: Executive directors’ entitlements to bonus and unvested share awards EBS – cash award

Pro rata award subject to Agreed performance conditions termination (e.g. retirement being satisfied. or ill health)

EBS – deferred share 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.

LTIP award

LGU award

Unvested awards pro-rated to reflect amount of time elapsed since the grant date.

Unvested award will be pro-rated to reflect amount of time elapsed since the grant date.

This pro-rated award will then vest on normal vesting date subject to the satisfaction of the performance condition(s).

This pro-rated award will then vest on the original vesting schedule subject to satisfaction of progress against strategy underpin.

Exercisable/transferable normally within six months of the vesting date although the shares generally need to be held until the end of any holding period.

Implementation 2015/16

No executive director left the Company’s employment and so the termination policy was not implemented during 2015/16.

Vested award normally exercisable within six months of leaving.

Vested awards normally exercisable/transferable within six months of leaving although the shares generally need to be held until the end of any holding period. The Committee has the discretion to remove or reduce the holding on grounds of compassion. No entitlement. Termination for gross misconduct or other grounds of fair dismissal

Vested award exercisable/transferable within six months of leaving.

Vested award normally exercisable/transferable within six months of leaving the end of any holding period.

Unvested award lapses.

Unvested award lapses.

Termination due to resignation for another role

No entitlement if employment ceases prior to the completion of the performance period.

Vested award exercisable/transferable within six months of leaving.

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.

Unvested award lapses.

Vested award normally exercisable/transferable within six months of leaving although the shares must be held until the end of any holding period.

Corporate event (e.g. change in control)

If employment ceases after the completion of the performance period the one-third EBS deferred share award will be forfeited.

Pro rata award subject to Vested and unvested performance conditions awards exercisable/ transferable on being satisfied. corporate event.

Vested award normally exercisable within six months of leaving. Unvested award lapses.

Vested award normally exercisable within six months of leaving. Unvested award lapses.

Unvested award lapses.

Unvested award normally pro-rated to reflect amount of time elapsed between grant date and change of control as a proportion of the original vesting period.

Unvested award normally pro-rated to reflect amount of time elapsed between grant date and change of control as a proportion of the original vesting period.

Normally exercisable/transferable on corporate event if performance condition has been satisfied.

Normally exercisable on corporate event if progress against strategy underpin has been satisfied.

Vested award normally exercisable/transferable on corporate event.

Vested award normally exercisable on corporate event.

Any holding period will normally cease to apply.

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) (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 is also permissible.

WS Atkins plc Annual Report 2016

91

External directorships The Board and the Committee recognise the benefit the Group can obtain if 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.

Remuneration policy for the chairman and non-executive directors

STRATEGIC REPORT

Governance > Remuneration report

Table 6 summarises the remuneration policy for the Company’s chairman and non-executive directors.

Table 6: Remuneration policy for the Company’s chairman and non-executive directors Component of remuneration

Fixed fees

Purpose and link to strategy

To attract and retain high-calibre individuals by offering market-competitive fixed fees commensurate with time commitment and responsibilities.

Operation

Fees The chairman is paid a basic fee which is inclusive of all committee roles undertaken. This is normally reviewed annually by the Committee. The non-executive directors are paid a basic fee and, if applicable, additional fees for chairmanship and membership of the Board Committees. An additional fee may also paid be to: a director who serves as the senior independent director; and, if one were to be appointed, the deputy chairman. These fees are normally reviewed annually by the executive directors.

GOVERNANCE

All fees are paid in cash in arrears.

Fees are 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. Any changes to fees paid are normally effective from 1 April. A review does not automatically give rise to an increase in fees.

The chairman and non-executive directors are not eligible for a pension, share incentives, annual bonus or any similar payments other than out of pocket expenses in connection with the performance of their duties. 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 separately 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) or other tax authorities. The Company may also meet the cost of compliance with HMRC’s individual reporting requirements where the director is not resident in the UK. 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 a substanial growth in the size and complexity of the Group or a 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 the limit as set out in the Company’s articles of association (as amended by shareholder approval from time to time). Performance

When determining fee increases the performance and time commitment of the non-executive directors is considered.

Implementation

2015/16

2016/17

With effect from 1 April 2015, the average increase to the total annualised fees paid to the chairman and non-executive directors was 2.4% compared with an average salary increase for all employees of 3.3%.

With effect from 1 April 2016, the average increase to the total annualised fees paid to the chairman and non-executive directors is 2.2% compared with an average salary increase for all employees of 2.4%.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Opportunity

FINANCIAL STATEMENTS

Reviews take into account economic climate, market conditions, Company performance, pay and conditions across the wider workforce, geographic footprint of operations, the non-executive director role, skills and remit, and the level of salary increases made in the rest of the business.

92

Remuneration report

Directors’ remuneration policy continued 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 annual re-election at the Company’s AGM. Table 7 summarises the dates of appointment and most recent re-election dates for the chairman and each of the non-executive directors.

Table 7: Dates of appointment and most recent re-election dates for the chairman and each of the non-executive directors Name of director Catherine Bradley Fiona Clutterbuck

1

Allan Cook Allister Langlands Thomas Leppert Raj Rajagopal Gretchen Watkins2

Date of appointment as a non-executive director

Date of last election/ re-election at AGM

Expiry of current term

9 June 2015

29 July 2015

9 June 2018

13 March 2007

29 July 2015

the 2017 AGM

10 September 2009

29 July 2015

10 September 2018

4 September 2013

29 July 2015

4 September 2016

1 October 2013

29 July 2015

1 October 2016

24 June 2008

29 July 2015

24 June 2017

1 August 2015

n/a

1 August 2018

1. Fiona Clutterbuck’s tenure has been extended until the 2017 AGM, subject to re-election at the 2016 AGM. 2. Gretchen Watkins was appointed by the Board following the 2015 AGM. She will stand for election by the shareholders for approval at the AGM to be held on 2 August 2016.

Copies of letters of appointment for 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 a 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 skills and experience. Any new non-executive directors will be paid in accordance with fee levels in place at the time of their appointment.

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. In addition, Viewpoint, the Group’s annual employee staff engagement survey, seeks employee feedback on remuneration. The executive remuneration framework set out in this report follows similar principles to those applied to the Group’s senior leadership team 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 Remuneration 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. 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 operational and senior leadership teams, 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-based employees are eligible to participate in the SIP. 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.

WS Atkins plc Annual Report 2016

93

Consideration of shareholder views in developing policy The Committee regularly consults with shareholders including on matters relating to executive remuneration. The Committee first contacted major shareholders, ISS, the Pensions and Lifetime Savings Association and the Investment Association in January 2016 regarding its review of remuneration policy, setting out its proposed changes and requesting feedback. Over the next few weeks a number of meetings were held with investors and the feedback received from them and ISS was used by the Committee to develop its proposals. Two key adjustments were made to our original proposals in response to the feedback we received during the consultation process. Our proposals included an increase to the shareholding guidelines for executive directors to reinforce their long-term alignment with our shareholders, along with the introduction of a post-vesting holding period of two years. We originally proposed to align these guidelines with the normal maximum LTIP opportunity in line with typical market practice (i.e. 150% of salary for the CEO, 150% for the Group finance director and 125% for the Group HR director). Following engagement with shareholders these shareholding guidelines have been further increased, to 200% of salary for all executive directors.

STRATEGIC REPORT

Governance > Remuneration report

Operating cash flow conversion was selected as the additional performance metric for the LTIP on the basis that it is complementary to EPS and is a core performance imperative in any consulting businesses. Strong future cash flows are also essential to the delivery of our progressive dividend policy and to underpin growth, both organic and through value-enhancing acquisitions. This measure will be assessed in aggregate over the full three-year performance period to avoid any distortions arising from the performance in any one year.

INVESTOR INFORMATION

FINANCIAL STATEMENTS

During the consultation exercise a small number of shareholders, together with ISS, asked for clarity around the proposed LTIP cash flow measure and sought assurances that it would not reward the same performance as the cash conversion measure which has been included in the Company’s annual bonus scheme since 2013. The Committee reflected on these comments in parallel with an ongoing debate within the business about the best way to measure and reward in-year cash flow performance and concluded that it was appropriate to adjust the cash measure in the annual bonus for the year ending 31 March 2017 from a cash conversion target to one based on lock-up days. Lock-up days is a measure of the number of days of revenue that the business has locked up in both debtors and unbilled work. It is a key operational metric and provides strong line-of-sight for participants. Controlling lock-up days will require the Group to drive cash receipts from clients for invoiced work and also to minimise the amount of unbilled work that it carries on its balance sheet. We believe that this change will further enhance the differentiation between the cash performance measures in line with the comments raised.

GOVERNANCE

We also set out our intention that vesting of LTIP awards would be based on EPS growth (weighted 75%) and average operating cash flow conversion (weighted 25%) over the performance period.

WS Atkins plc Annual Report 2016

94

Remuneration report

Annual remuneration report Table of Contents Single total figures of remuneration for 2015/16 – executive directors (audited)

95

Implementation of remuneration policy: executive directors

96

Share awards (audited)

103

Relative importance of spend on pay

104

Percentage change from 2015 to 2016 in remuneration of director undertaking the role of CEO

104

CEO pay for performance comparison over the last seven years

105

Payments to past executive directors (audited)

105

Payments for loss of office (audited)

106

Statement of directors’ shareholdings and share interests (audited)

106

Single total figures of remuneration for 2015/16 – chairman and non-executive directors (audited)

107

Implementation of remuneration policy: non-executive directors

108

Payments to past non-executive directors (audited)

108

Other information

109

This section of the 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 2016 and will, together with the annual statement from the Committee chairman, be proposed for an advisory vote by shareholders at the AGM to be held on 2 August 2016. 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.

WS Atkins plc Annual Report 2016

Governance > Remuneration report

95

Single total figures of remuneration for 2015/16 – executive directors (audited) STRATEGIC REPORT

Table 8 sets out in the required form the total remuneration paid for each of our executive directors for the financial year ended 31 March 2016.

Table 8: Total 2015/16 remuneration – executive directors

Pension 4

Sub total

Annual bonus5

Vested LTIP / LGU

Other payments 8

Sub total

Total

 

2015 /16 £000

2014 /15 £000

2015 /16 £000

2014 /15 £000

2015 /16 £000

2014 /15 £000

2015 /16 £000

2014 /15 £000

2015 /16 £000

2014 /15 £000

2015 /16 £000

2014 /15 £000

2015/ 16 £000

2014 /15 £000

2015 /16 £000

2014 /15 £000

2015 /16 £000

2014 /15 £000

James Cullens1

277.5

202.5

14.7

11.0

69.4

50.6

361.6

264.1

210.9

192.9

–

–

–

–

210.9

192.9

572.5

457.0

Heath Drewett

357.0

347.0

15.0

15.0

89.3

86.8

461.3

448.8

284.7

330.5

229.8

402.3

14.8

12.9

529.3

745.7

990.6

1,194.5

n/a

81.3

n/a

4.8

n/a

9.8

n/a

95.9

n/a

79.8

n/a

n/a

n/a

20.7

n/a

100.5

n/a

196.4

Alun Griffiths2 Uwe Krueger Total

603.0

586.0

50.6

79.5

150.8

146.5

804.4

812.0

601.1

706.9

392.0

709.2

31.2

2.3 1,024.3

1,418.4

1,828.7 2,230.4

1,237.5

1,216.8

80.3

110.3

309.5

293.7 1,627.3

1,620.8

1,096.7

1,310.1

621.8

1,111.5

46.0

35.9 1,764.5

2,457.5

3,391.8 4,078.3

INVESTOR INFORMATION

1. James Cullens was appointed on 1 July 2014. The remuneration for 2014/15 relates to the period for which he held office. 2. Alun Griffiths retired on 30 July 2014. The remuneration for 2014/15 relates to the period for which he held office. In accordance with the Regulations, the disclosed value in respect of Alun Griffiths’ LTIP awards granted on 13 August 2012, and exercised post-retirement, is reported in the payments to past executive directors section (page 105). 3. 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 annum. 4. 25% of basic salary cash allowance. 5. Value of total bonus (two thirds cash and one third shares). Further detail on bonus payments is provided in tables 10 and 11. 6. The 2015/16 single figure includes values in respect of the 2013 LTIP and the first tranche of the 2012 LGU: i The EPS performance condition attached to the 2013 LTIP awards has been met in part as outlined in table 13. The awards will vest on, and will be capable of being exercised from, 24 June 2016. The disclosed value is based on the average mid‑market quotation of the Company’s shares for the three months ended 31 March 2016 (£13.7049) and includes the value of dividend equivalents which will be payable on the vesting date. ii As outlined in table 13, the first of three equal tranches of the 2012 LGU award will fully vest on, and is capable of being exercised from, 13 August 2016. The disclosed value is based on the difference between the average mid‑market quotation of the Company’s shares for the three months ended 31 March 2016 (£13.7049) and the six-month average share price at grant (£7.1869). There is no entitlement to dividends or dividend equivalents under the terms of the LGU. The 2015/16 single figure will be restated in the 2016/17 Annual remuneration report to reflect the value of these awards on their respective vesting dates. 7. This relates to LTIP awards granted in 2012 which partially vested on 13 August 2015. The disclosed values reported in last year’s Annual remuneration report were, in accordance with the Regulations, based on the average mid-market quotation of the Company’s shares for the three months ended 31 March 2015. These figures, as required by the Regulations, have been restated to reflect the final value of the 2012 LTIP awards based on the Company’s share price at vesting (£15.36). The disclosed value includes the value of dividend equivalents payable at vesting. 8. Other payments generally relate to dividend equivalent payments made following the exercise of a share award during the year which had been granted in connection with a deferral of annual bonus under the terms of the Atkins Deferred Share Plan (DSP). In respect of Uwe Krueger, it also includes an aggregate taxfree allowance of £39,000 for travel expenses incurred between his home and the UK during the first five years following his appointment (a direct replacement for the rental allowance disclosed in 2011). This allowance ceased on 13 June 2016.

GOVERNANCE

Taxable benefits3

Salary

Variable elements of reward

FINANCIAL STATEMENTS

Fixed elements of reward

WS Atkins plc Annual Report 2016

96

Remuneration report

Annual remuneration report continued Implementation of remuneration policy: executive directors Salary The percentage increases in salary for each executive director with effect from both 1 April 2015 and 1 April 2016 are set out in table 9 in accordance with the Company’s approved remuneration policy. Each percentage increase was below the average salary increase for all employees across the Group in the same year (2016: 2.4%, 2015: 3.3%).

Table 9: Executive director salaries

Name

Salary from 1 April 2016

Increase in salary from 2015/16

Salary from 1 April 2015

Increase in annualised salary from 2014/15

James Cullens

£281,700

1.5%

£277,500

2.8%

Heath Drewett

£362,400

1.5%

£357,000

2.9%

Uwe Krueger

£612,000

1.5%

£603,000

2.9%

Pension (audited) Each executive director is entitled to receive a defined contribution pension contribution or a cash allowance in lieu of a pension contribution. All executive directors received their 2015/16 pension benefit in the form of a cash allowance of 25% of basic salary as shown in the single total remuneration figure table (table 8 (page 95)). The maximum Company contribution to the defined contribution pension of other UK-based staff is 10% of salary (13% of salary for those who previously received a final salary pension). James Cullens, Heath Drewett and Uwe Krueger, who were all appointed after the final salary pension scheme closed to new entrants, receive higher cash allowances reflecting their roles as executive directors. Annual bonus: 2015/16 performance against targets (audited) The Committee’s assessment of performance in the financial year ended 31 March 2016 is shown in table 10 (page 97).

WS Atkins plc Annual Report 2016

Governance > Remuneration report

97

Overview of performance

Group profit after tax (50%)

2015/16 bonus targets

Threshold

Budgeted

Stretch

Actual

Group profit after tax

£95.9m

£106.6m

£110.9m

£107.6m

12.5%

50%

100%

62%

Payout level (% of maximum)

For bonus purposes, the Committee believes that underlying profit after tax is a more representative measure of performance, removing certain items from the reported profit after tax that may give a distorted view of performance. The following items have been removed from the Group’s reported profit after tax to determine the underlying profit after tax figure: 2016 (£m) 103.4 (6.5) 3.9 3.1 3.0 2.0 (1.3) – 107.6

Reported profit after tax profit on sale of Woodcote Grove amortisation of acquired intangible assets net loss/(profit) on disposal of business exceptional transaction costs deferred acquisition payments fair value adjustment on deferred acquisition consideration impairment of goodwill Underlying profit after tax

2015 (£m) 85.7 – 4.4 (0.3) 3.9 0.9 – 2.8 97.4

The adjusted result of £107.6m (2015: £96.3m, after removing the £1.1m benefit of the research and development expenditure credit (RDEC) following early adoption of new rules in the UK) was above the challenging budgeted target resulting in a payout of 62% (2015: 98%) for this element of annual bonus. Cash conversion (25%)

2015/16 bonus targets Half year cash conversion Full year cash conversion Payout level (% of maximum)

Threshold 4.5% 63.0% 12.5%

Budgeted 5.0% 70.0% 50%

Stretch 11.3% 76.1% 100%

GOVERNANCE

Component

STRATEGIC REPORT

Table 10: Assessment of performance and bonus payout

Actual 34.4% 78.6% 100%

The cash conversion target measures operating cash flow as a percentage of budgeted profit.

This resulted in both the half year and full year stretch conversion targets (11.3% and 76.1% respectively) being exceeded leading to the maximum 100% payment (2015: 100%) for this element of the bonus. James Cullens Payment of 80% achieved for: • successful delivery of an improved and consistent global recruitment programme, including a digital attraction strategy • implementing succession plans for the executive directors, operational leadership team and the top 300 key roles and introducing a new internal development programme • ensuring that the right senior talent was recruited into the new Advisory business team, which is now creating new revenue opportunities throughout the Group. Heath Drewett Payment of 95% achieved for: • improving commercial oversight and enhancing support for major projects, in the US and UK in particular • developing and agreeing with the trustee a long-term investment strategy for the Atkins Pension Plan • full engagement on Group wide merger and acquisition initiatives • development of new differentiated services. Uwe Krueger Payment of 95% achieved for: • working with the Group HR director to successfully implement an executive succession plan for the top 300 key roles within the Group • ensuring two strategically important acquisitions (the projects, products and technology segment of EnergySolutions and Howard Humphreys) were delivered successfully • championing the new Advisory business team, creating new revenue opportunities for the Group.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Personal objectives (25%)

FINANCIAL STATEMENTS

The Group’s cash performance was very good. Operating cash flow was £116.5m (2015: £133.9m) with half year and full year cash conversion results of 34.4% and 78.6% respectively.

98

Remuneration report

Annual remuneration report continued Annual bonuses payable to the executive directors for the financial year ended 31 March 2016 are shown in table 11. Two thirds of the payment to current directors will be payable in cash and one third will be deferred into shares for three years via the DSP, subject to continued employment and malus and clawback provisions.

Table 11: Annual bonuses 2015/16 bonus

Name

Cash

Deferred

Total

% of salary

Increase/ (decrease) in annualised bonus from prior year

2014/15 bonus

Cash

Deferred

Total

% of salary

Increase/ (decrease) in annualised bonus from prior year

James Cullens1

£140,600

£70,300

£210,900

76.0

(18.0)%

£128,587

£64,294

£192,881

95.3

n/a

Heath Drewett

£189,805

£94,903

£284,708

79.8

(13.9)%

£220,345

£110,173

£330,518

95.3

(0.1)%

Uwe Krueger

£400,744

£200,372

£601,116

99.7

(15.0)%

£471,242

£235,621

£706,863

120.6

3.3%

1. J ames Cullens was appointed to the Company on 1 July 2014. His annual bonus for 2014/15 relates to the period for which he held office. To ensure a like for like comparison the decrease in his annualised bonus compares the full year bonus paid to him for the year ended 31 March 2016 with an equivalent full year bonus for the year ended 31 March 2015 (£257,175).

Annual bonus: 2016/17 performance targets The Committee has determined that the bonus for the 2016/17 financial year will operate on similar terms to 2015/16. 50% of the bonus will be based on Group profit after tax performance, a further 25% on a cash measure and the remaining 25% on individual objectives aligned to key strategic areas for each executive director. Following shareholder consultation in relation to the Company’s long-term incentive arrangements, the Committee has changed the cash measure to one based on lock-up days. Lock-up days is a measure of the number of days of revenue that the business has locked up in both debtors and unbilled work. It is a key operational metric and this change further enhances the differentiation between the EBS cash performance measure and that proposed for the new LTIP. 50% of the maximum opportunity will be paid for meeting the budgeted profit after tax and lock-up days targets and 100% for meeting the stretch targets. The profit after tax and cash conversion targets are considered commercially sensitive so will not be disclosed in advance, although it is the Committee’s intention to disclose these and an assessment of performance against these targets in next year’s report. Table 12 (page 99) provides the headline strategic areas under which personal 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.

WS Atkins plc Annual Report 2016

Governance > Remuneration report

99

Name James Cullens

Strategic area • deliver segmented, diverse talent through an optimised and social recruitment strategy • design and deliver a Group-wide assessment programme to find and develop talent below senior executive level throughout the Company • implement succession plans for non-executive directors and further development of those in place for senior executive roles

Heath Drewett

• develop client value propositions in order to increase business growth. • negotiate with the Atkins Pension Plan trustee to secure successful agreement of the terms of the triennial pension valuation

STRATEGIC REPORT

Table 12: Strategic areas included in 2016/17 annual bonus

• review the Group’s funding position to ensure the Company is able to take advantage of potential new business opportunities • develop and support US divisional finance leadership team Uwe Krueger

• lead the external auditor transition process. • increase new business revenue opportunities • develop and support US leadership team with a focus on key accounts and strategic pursuits • support growing Advisory business ensuring that appropriate resource is available to secure new business opportunities.

LTIP and LGU outcomes in 2015/16 (audited) The long-term incentive values shown in the single total remuneration figure table (table 8 (page 95)) relate to: • LTIP awards granted in 2013 and for which the performance period was 1 April 2013 to 31 March 2016

GOVERNANCE

• support succession plan development for senior executive roles

• the first of three equal tranches of the LGU award granted in 2012 which will vest on, and is capable of being exercised from, 13 August 2016.

INVESTOR INFORMATION

In determining the underlying diluted EPS as at 31 March 2016, the Committee considered those same items that could give a distorted view of performance as were considered for the purposes of bonus calculations. In all cases its treatment was consistent with that applied in relation to the bonus. The Group’s underlying diluted EPS also includes the benefit of the new UK RDEC tax credit regime. To ensure a consistent treatment with the underlying diluted EPS as at 31 March 2013, the Committee removed the positive impact in the year ended 31 March 2016 of the change to the new RDEC regime (1.3p). Overall, these adjustments increased the reported diluted EPS as at 31 March 2016 for LTIP vesting purposes from 103.0p to 105.9p. Accordingly, the actual vesting percentage for the LTIP awards granted in 2013 is 48%.

FINANCIAL STATEMENTS

The EPS performance targets and vesting levels for the LTIP awards granted in 2013 are set out in table 13 (page 100). The Committee adjusted the underlying diluted EPS as at 31 March 2013 as a consequence of the changes to IAS 19 to ensure that the underlying diluted EPS was measured consistently during the performance period and to facilitate a like for like comparison. This adjustment reduced the underlying diluted EPS as at 31 March 2013 from 90.0p to 85.9p.

WS Atkins plc Annual Report 2016

100

Remuneration report

Annual remuneration report continued Table 13: Vesting of 2013 LTIP awards and first tranche of 2012 LGU awards (audited) Target for vesting

a) 2013 LTIP awards EPS condition EPS growth1

Threshold

Maximum

Actual

5% compound p.a.

12% compound p.a.

7.2% compound p.a.

15.8%

40.5%

23.3%

25%

100%

48%

EPS growth over the performance period Vesting level In determining the LTIP outcome the Committee concluded that:

• EPS growth over the performance period had been suitably underpinned by cash generation • no significant acquisitions were completed in the performance period for which it was necessary to adjust vesting • inflation during the performance period has not had a significant effect on the level of challenge presented by the targets • it was not appropriate to apply malus provisions. 1. EPS adjusted to remove the impact of non-underlying and other one-off items and also changes due to IAS19 to enable a like for like comparison.

Name

LTIP award granted

Vesting %

Vested award

Estimated share price on vesting date1

Estimated value of LTIP award on vesting date

Value of dividend equivalents on vesting date

Estimated total LTIP value

Heath Drewett

25,808

48

12,387

£13.7049

£169,763

£12,876

£182,639

Uwe Krueger

43,644

48

20,949

£13.7049

£287,104

£21,776

£308,880

1. The estimated value is based on the average mid-market quotation of the Company’s shares for the three months ended 31 March 2016, in accordance with the Regulations.

b) 2012 LGU awards Strategic measures

Overview of performance

Group operating margin

During the performance period, the Group’s operating margin has increased from 6.5% to 8.0% in line with our strategic objectives.

Geographical split of revenue

While investment, particularly from acquisitions, has focused outside the UK, the good performance of the UK itself means that it has continued to play an important part in the Group’s development.

Growth

Revenue from continuing businesses (excluding disposals) grew from £1.4bn in 2011/12 to £1.9bn in 2015/16 (6.7% p.a.).

Group’s financial performance

The Company’s strong share price growth during the performance period is underpinned by significant earnings growth (9.9% p.a.).

Malus provisions

To the best of the Committee’s knowledge, there have not been any circumstances which would justify the application of the malus provisions.

Vesting %

100%. The LGU is a growth plan linked to share price appreciation. Payments are directly proportional to the share price growth achieved and the plan has no value to participants if no growth is achieved.

Name Heath Drewett Uwe Krueger

Vested Units

Estimated average share price on vesting date1

LGU base value

Estimated LGU value2

100

7,235

£13.70492

£7.1869

£47,158

100

12,754

£13.70492

£7.1869

£83,131

1st tranche of 2012 LGU units (vests on 13 August 2016)

Vesting %

7,235 12,754

1. The estimated value is based on the average mid-market quotation of the Company’s shares for the three months ended 31 March 2016, in accordance with the Regulations. 2. The estimated LGU value is the difference between the LGU base value and the estimated average share price on the vesting date.

WS Atkins plc Annual Report 2016

Governance > Remuneration report

101

STRATEGIC REPORT

LTIP, LGU and DSP awards in 2015/16 (audited) Executive directors were granted a LTIP award of 75% of salary. The vesting of these awards is subject to the EPS targets described in table 14.

Table 14: LTIP performance measure for awards made in 2015 (audited) 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 2015 to 31 March 2018. Executive directors were also granted 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: GOVERNANCE

• margins over the longer term • geographic balance • growing organically and through acquisition. One third of annual bonuses payable to the executive directors for the year ended 31 March 2015 was deferred via the DSP. LTIP, LGU and DSP awards were all granted on 25 June 2015. In accordance with the rules and terms of each plan, the LTIP and DSP awards will vest on the third anniversary of the date of grant, however, the LGU awards will vest on the fourth, fifth and sixth anniversaries of the date of grant in three equal tranches. LTIP, LGU and DSP awards granted during the year are set out in table 15.

Heath Drewett

Uwe Krueger

Stretch performance (% of face value)

End of performance period

£64,287

n/a

n/a

n/a

Plan

Date of grant

DSP1

25/06/15

23%

LTIP

2

25/06/15

75%

£208,112

25%

100%

31/03/18

LGU3

25/06/15

50%

£138,746

16.7%

33.3%

31/03/19 to 31/03/21

DSP1

25/06/15

31%

£110,159

n/a

n/a

n/a

LTIP

2

25/06/15

75%

£267,749

25%

100%

31/03/18

LGU3

25/06/15

50%

£178,500

16.7%

33.3%

31/03/19 to 31/03/21

DSP1

25/06/15

39%

£235,613

n/a

n/a

n/a

LTIP

2

25/06/15

75%

£452,237

25%

100%

31/03/18

LGU3

25/06/15

50%

£301,488

16.7%

33.3%

31/03/19 to 31/03/21

1. T he DSP awards have been granted in the form of nil-cost options and represent the deferral of one-third of the annual bonus for the financial year ended 31 March 2015. The face value has been calculated using the middle market quotation for an Atkins ordinary share on 24 June 2015, the day immediately preceding the date of grant, which was £15.45. The stated values exclude any amount attributable to dividend equivalents. 2. The LTIP awards have been granted in the form of nil-cost options. The face value has been calculated using the middle market quotation for an Atkins ordinary share on 24 June 2015, the day immediately preceding the date of grant, which was £15.45. The stated values exclude any amount attributable to dividend equivalents over the relevant performance period. 3. The LGU awards are granted in the form of units where the value of the LGU is dependent on sustained long-term share price growth. The 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 25 June 2015 date of grant, which was £13.59585. Given the value of the LGU is dependent on share price growth, the percentage of face value for stretch performance has been valued in a manner consistent with the guidance issued by the GC100 and the Financial Reporting Council's Financial Reporting Lab, namely assuming units are worth 33% of their initial face value. The target performance face value is assumed to be 50% of stretch performance face value.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

James Cullens

Face value (£)

Threshold performance (% of face value)

Face value (% of basic salary)

FINANCIAL STATEMENTS

Table 15: LTIP, LGU and DSP awards made during the year (audited)

102

Remuneration report

Annual remuneration report continued LTIP awards to be granted in 2016/17 Figure 3: Long-term incentive framework as determined from our remuneration principles Our remuneration principles Deliver our strategy and shareholder value

Simple and transparent

Performance conditions are clear, simple and strategically aligned which will drive long-term performance

P

P

P

Aligned to shareholder interests over the long-term

P P

P

Long-term incentive

Simple with emphasis on long-term performance

Reward performance

Incentivise talent

Quantum of awards aligned to the market which are sufficient to retain and recruit executive talent

Pay no more than necessary

P

P

P

At the 2016 AGM, shareholders will be asked to approve a new remuneration policy and revised rules for the LTIP as outlined in the future policy table (table 2 (page 84)). If approved by shareholders, the Committee intends to grant LTIP awards of 150% of salary to both Uwe Krueger and Heath Drewett and 125% of salary to James Cullens. The vesting of awards granted under the terms of the LTIP will be determined by two performance measures as set out in table 16.

Table 16: LTIP performance measures for awards made in 2016 EPS growth (75% weighting)

Operating cash flow conversion (25% weighting)

% of award that vests

12% or greater per annum

98% or more

100

Between 5% and 12% per annum

Between 83% and 98%

Pro rata between 25 and 100 on a straight line basis

5% per annum

83%

25

Below 5% per annum

Below 83%

0

EPS growth: Underlying diluted EPS is the primary metric for measuring and rewarding the delivery of our growth agenda over the medium to long term. The underlying diluted EPS for the year ended 31 March 2016 was 107.3p. Cash conversion: Cash flow is a key strategic measure which is essential to deliver the Company’s progressive dividend policy and to underpin growth, both organic and through value-enhancing acquisitions. Cash flow also offers a good performance link with the operational excellence pillar of our strategy which is focused on the quality of earnings. Both malus and clawback provisions will be applied to the new LTIP as set out in the remuneration policy (page 87). The Committee believes that these performance targets are appropriate and stretching in the current environment. Performance against these targets will be measured from 1 April 2016 to 31 March 2019 and, in determining the level of vesting, the Committee will give consideration to: • the impact of any significant acquisitons or disposals in the performance period • for EPS growth, the impact of inflation during the performance period if it deems that this has had a significant impact on the level of challenge presented by the targets • for cash conversion, the overall level of business performance. In considering these factors, the Committee may reduce the level of vesting. All employee share plans All executive directors currently participate in the SIP.

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103

 hare awards (audited) S Tables 17 and 18 (page 104) set out details of the executive directors’ interests in relation to share awards made under each of the Company’s share plans.

Table 17: Directors’ share awards and long-term incentives – DSP and LTIP (nil-cost options)

2

17/11/14

15,564

–

–

–

15,564

1303.0

26/06/17 4

17/11/24

25/06/15

–

13,470

–

–

13,470

1557.0

25/06/18

25/06/25

1557.0

25/06/18

25/06/25

25/06/15

LTIP 2

DSP

DSP

Gain on exercise (£)

Date of lapse/ expiry of option

–

4,161

–

–

4,161

15,564

17,631

–

–

33,195

13/08/12 3

35,082

–

13/08/15

13/08/22

24/06/13

25,808

–

–

–

25,808

973.0

24/06/16

24/06/23

17/11/14

20,003

–

–

–

20,003

1303.0

26/06/17 4

17/11/24

25/06/15

–

17,330

–

–

17,330

1557.0

25/06/18

25/06/25

(24,557) (10,525)

–

– 1597.00

1597.00

670.0

688.5

392,175

02/07/12

11,002

–

(11,002)

–

–

02/07/15

02/07/22

24/06/13

10,549

–

–

–

10,549

973.0

24/06/16

24/06/23

17/11/14

8,443

–

–

–

8,443

1303.0

26/06/17 4

17/11/24

25/06/15

–

7,130

–

–

7,130

1557.0

25/06/18

25/06/25

13/08/15

13/08/22

Total LTIP 2

Mid-market price at date of grant (pence)

175,702

110,887

24,460

(35,559) (10,525)

89,263

13/08/12 3

61,844

–

(43,290) (18,554)

–

24/06/13

43,644

–

–

–

43,644

973.0

24/06/16

24/06/23

17/11/14

33,781

–

–

–

33,781

1303.0

26/06/17 4

17/11/24

25/06/15

–

29,271

–

–

29,271

25/06/18

25/06/25

02/07/12

19,078

–

(19,078)

–

–

02/07/15

02/07/22

24/06/13

21,892

–

–

–

21,892

973.0

24/06/16

24/06/23

17/11/14

17,471

–

–

–

17,471

1303.0

26/06/17 4

17/11/24

–

–

15,250

1557.0

25/06/18

25/06/25

(62,368) (18,554)

161,309

25/06/15 Total Aggregate gains on share options 2016 Aggregate gains on share options 2015

–

15,250

197,710

44,521

GOVERNANCE

LTIP

DSP

Uwe Krueger

Lapsed

Award date

Total Heath Drewett

Exercised

First date of exercise/ end of performance condition

Plan name 1

Market price on exercise (pence)

567,877 1597.00

670.0

691,341

1557.0 1597.00

688.5

304,676

996,017 1,563,894 1,152,755

INVESTOR INFORMATION

1. T he awards granted under the terms of the LTIP and DSP are structured as options for which the exercise price is nil. 2. S ubject to performance criteria described in note 33 to the Financial Statements (page 185). 3. The 2012 LTIP award, which was subject to an earnings per share (EPS) condition, partially vested (70%), as disclosed in last year's Annual Report. 4. LTIP and DSP share awards are normally granted in June/July each year. However, it was not possible to grant share awards in June/July 2014 due to the Company being in a prohibited period at that time. When the awards were granted on 17 November 2014, the Committee agreed that, in accordance with the rules and terms of the share plans, the vesting date would be on 26 June 2017, which would have been the scheduled vesting date had it been possible to make the awards as originally intended.

FINANCIAL STATEMENTS

James Cullens

Granted

Number of shares under option at 31 March 2016

Number of shares under option at 1 April 2015

STRATEGIC REPORT

Governance > Remuneration report

WS Atkins plc Annual Report 2016

104

Remuneration report

Annual remuneration report continued Table 18: Directors’ long-term incentives – LGU Plan (units)

James Cullens

First date of exercise/ end of performance condition

Date of lapse/ expiry of option

Plan name 1

Award date

Granted

Exercised

LGU 2

17/11/14

10,162

–

–

–

10,162

1303.0

17/11/18

17/11/24

25/06/15

–

10,205

–

–

10,205

1557.0

25/06/19

25/06/25

LGU 2

LGU 2

Lapsed

Gain on exercise (£)

10,162

10,205

–

–

20,367

13/08/12

21,705

–

–

–

21,705

670.0

13/08/16

13/08/22

24/06/13

19,336

–

–

–

19,336

973.0

24/06/17

24/06/23

–

17/11/14

13,061

–

–

–

13,061

1303.0

17/11/18

17/11/24

25/06/15

–

13,129

–

–

13,129

1557.0

25/06/19

25/06/25

54,102

13,129

–

–

67,231

13/08/12

38,263

–

–

–

38,263

670.0

13/08/16

13/08/22

24/06/13

32,699

–

–

–

32,699

973.0

24/06/17

24/06/23

17/11/14

22,057

–

–

–

22,057

1303.0

17/11/18

17/11/24

25/06/15

–

22,175

–

–

22,175

1557.0

25/06/19

25/06/25

93,019

22,175

–

–

115,194

Total Uwe Krueger

Market price on exercise (pence)

Midmarket price at date of grant (pence)

Number of units under option at 1 April 2015

Total Heath Drewett

Number of units under option at 31 March 2016

Total

–

–

Aggregate gains on units 2016

–

Aggregate gains on units 2015

–

1. Awards granted under the terms of the LGU. 2. The awards granted under the terms of the LGU are structured as units and are subject to a strategic underpin as described in note 33 to the Financial Statements (page 185).

Relative importance of spend on pay Table 19 sets out total employee costs and distributions to shareholders for the years ended 31 March 2015 and 31 March 2016.

Table 19: Relative importance of spend on pay

Total employee costs (including directors)

1

Distributions to shareholders2

2015/16 £m

2014/15 £m

% change

1,095.3

940.8

16.42

36.2

33.4

8.38

1. Total employee benefit costs represents amounts included in note 6 to the Financial Statements (page 142). The increase relates principally to exchange rate fluctuations and employee costs following acquisitions. 2. Distributions to shareholders include the total dividends paid in respect of each financial year.

Percentage change from 2015 to 2016 in remuneration of director undertaking the role of CEO Table 20 shows the change in remuneration, from 2015 to 2016, of the CEO and a comparator group consisting of all UK employees.

Table 20: Change in CEO’s remuneration compared to UK employees % change in salary

% change in taxable benefits

% change in annual bonus

CEO

1.49%

(36.45)%2

(14.96)%

Comparator group: UK employees1

3.39%

10.91%

(1.37)%

1. T he comparator group consists of all UK-based employees within the Atkins Group excluding the CEO. This comparator group has been chosen for the purpose of this comparison as the CEO is employed in the UK. 2. The reason for the significant reduction in the CEO’s taxable benefits is that taxable benefits received in the year ended 31 March 2015 included the settlement of professional fees incurred in prior years following the receipt of invoices during the year.

WS Atkins plc Annual Report 2016

105

CEO pay for performance comparison over the last seven years Figure 4 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 seven-year period ended 31 March 2016. This index is currently considered to be 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 seven-year period.

Figure 4: Total shareholder return 400

STRATEGIC REPORT

Governance > Remuneration report

Atkins – Total return FTSE 250 – Total return 300

100

Source: Datastream

GOVERNANCE

200

0 2009

2010

2011

2012

2013

2014

2015

2016

Table 21 summarises the total remuneration for the CEO over the same seven-year period, as well as showing the outcomes of short- and long-term incentive plans as a percentage of maximum.

Table 21: Remuneration for the CEO over the last seven years

Annual bonus £000 (% of maximum)

2010/11

2011/12

2011/12

2012/13

2013/14

2014/15

2015/16

KEFC

KEFC

KEFC

UK

UK

UK

UK

UK

1,072.0

932.4

289.4

986.8

1,387.8

2,139.4

2,230.42

1,828.73

382.5 100.0

378.7 86.5

102.1 70.0

394.9 71.8

639.4 93.0

684.5 96.7

706.9 96.5

601.1 79.8

1

1

Long-term variable pay (% of maximum) – LTIP

45.7

–

–

n/a

n/a

68.7

70.0

48.0

Long-term variable pay (% of maximum) – LGU

n/a

n/a

n/a

n/a

n/a

n/a

n/a

100.0

1. Keith Clarke (KEFC) retired from the Company on 31 July 2011 and Uwe Krueger (UK) was appointed to the Company on 14 June 2011. 2. Total remuneration (single figure) for 2014/15 includes £709,198 in respect of the 2012 LTIP award. The disclosed value reported in last year’s Annual remuneration report was, in accordance with the Regulations, based on the average mid-market quotation of the Company’s shares for the three months ended 31 March 2015. This figure, as required by the Regulations, has been updated to reflect the final value of the 2012 LTIP award based on the Company’s share price at vesting and includes the value of dividend equivalents paid on the vesting date (£44,264). 3. Total remuneration (single figure) for 2015/16 includes £308,880 in respect of the 2013 LTIP award and £83,131 in respect of the first tranche of the 2012 LGU award: (i) The LTIP award vests on, and will be capable of being exercised from, 24 June 2016. The disclosed value is based on the average mid‑market quotation of the Company’s shares for the three months ended 31 March 2016 and includes the value of dividend equivalents which will be payable on the vesting date (£21,776). The final value of the 2013 LTIP award will be calculated on the basis of the Company’s share price at vesting. (ii) The first of three equal tranches of the 2012 LGU award vests on, and will be capable of being exercised from, 13 August 2016. The disclosed value is based on the difference between the average mid‑market quotation of the Company’s shares for the three months ended 31 March 2016 (£13.7049) and the six-month average share price at grant (£7.1869). There is no entitlement to dividends or dividend equivalents under the terms of the LGU. The final value for the first tranche of the 2012 LGU award will be calculated on the difference between the six-month average share price at vesting and at grant.

Payments to past executive directors (audited) Alun Griffiths, who retired as a director on 30 July 2014, retained pro rata entitlements to share awards granted under both the LTIP and the LGU, subject to performance. Under the LTIP, in accordance with the plan rules, 11,698 shares vested on 13 August 2015 with a disclosed value of £191,642. This has been calculated based on the share price at vesting, in accordance with the Regulations. The disclosed value also includes the value of dividend equivalents payable on the vesting date.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

CEO Total remuneration (single figure) £000

2009/10

INVESTOR INFORMATION

Financial year

106

Remuneration report

Annual remuneration report continued 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 In accordance with the existing remuneration policy, executive directors are ordinarily expected to build up an interest in the Company’s shares equivalent to 100% of basic salary within a five-year period. Heath Drewett and Uwe Krueger exceed the Company’s current 100% of basic salary share ownership target. James Cullens, who was appointed on 1 July 2014, is expected to satisfy the salary share ownership target within five years of his appointment. There are no shareholding requirements for the chairman or the non-executive directors. The interests of the directors and their families in the ordinary shares of 0.5p each in the Company as at 31 March 2016 are shown in tables 22 and 23. Directors’ interests in shares of the Company (audited) Table 22: Executive directors’ interests in shares of the Company Share ownership guideline requirement as a percentage of salary James Cullens1

As a At 15 June percentage of 20163 salary2

At 31 March 2016

As a percentage of salary2

As a percentage of salary2

At 31 March 2015

100%

139

0.7%

105

0.6%

–

0%

Heath Drewett

100%

54,850

212.5%

54,816

222.4%

35,858

136.7%

Uwe Krueger

100%

51,155

133.1%

51,120

135.1%

59,627

132.1%

Total

106,144

106,041

95,485

1. James Cullens was appointed on 1 July 2014. 2. Based on the value of such shares at the time of their acquisition or market value at the stated date, whichever is higher. 3. Changes in interests for all the executive directors between 31 March 2016 and 15 June 2016 relate to shares acquired through their participation in the SIP.

Subject to approval by shareholders of the new remuneration policy at the AGM to be held on 2 August 2016, the shareholding ownership guideline requirement will increase to 200% of basic salary. This is expected to be achieved within five years following shareholder approval.

Table 23: Chairman and non-executive directors’ interests in shares of the Company At 15 June 2016

At 31 March 2016

At 31 March 2015

Catherine Bradley1

–

–

n/a

Fiona Clutterbuck

4,146

4,146

4,146

21,442

21,442

17,142

5,000

5,000

5,000

Allan Cook Allister Langlands Thomas Leppert

2,676

2,676

–

Raj Rajagopal

5,000

5,000

5,000

Gretchen Watkins2 Total 1. Catherine Bradley was appointed on 9 June 2015. 2. Gretchen Watkins was appointed on 1 August 2015.

WS Atkins plc Annual Report 2016

–

–

n/a

38,264

38,264

31,288

107

Single total figures of remuneration for 2015/16 – chairman and non-executive directors (audited) Table 24 sets out in the required form the total remuneration earned by our chairman and non-executive directors for the financial year ended 31 March 2016.

Table 24: Total 2015/16 remuneration – chairman and non-executive directors Fees

Taxable benefits 4

Total

2015/16 £000

2014/15 £000

2015/16 £000

2014/15 £000

2015/16 £000

2014/15 £000

207.0

202.5

0.5

1.1

207.5

203.6

Catherine Bradley1

39.5

n/a

–

n/a

39.5

n/a

Fiona Clutterbuck

58.5

57.0

–

–

58.5

57.0

Allister Langlands

56.0

51.5

5.4

9.9

61.4

61.4

 

STRATEGIC REPORT

Governance > Remuneration report

Chairman Allan Cook

Thomas Leppert

49.0

46.7

9.4

3.4

58.4

50.1

Raj Rajagopal

57.0

55.5

–

–

57.0

55.5

Gretchen Watkins2

30.0

n/a

2.1

n/a

32.1

n/a

n/a

15.8

n/a

2.6

n/a

18.4

497.0

429.0

17.4

17.0

514.4

446.0

Former non-executive directors Rodney Slater3 Total

GOVERNANCE

Non-executive directors

1. Catherine Bradley was appointed on 9 June 2015. This remuneration relates to the period for which she held office. 2. Gretchen Watkins was appointed on 1 August 2015. This remuneration relates to the period for which she held office. 3. Rodney Slater retired from the Board on 30 July 2014. This remuneration relates to the period for which he held office. 4. Includes business expenses chargeable to income tax.

INVESTOR INFORMATION

The current limit has been in place since 2008 and, although it is anticipated that the fees paid in 2016/17, as show in table 25 (page 108), will be below the current limit, it is important to retain sufficient flexibility for the future. The actual fees paid to the chairman and non-executive directors, which are expected to be well below the new limit for the foreseeable future, will be disclosed in the Annual remuneration report, which is subject to an annual shareholder advisory vote.

FINANCIAL STATEMENTS

The total amount of fees paid to the chairman and non-executive directors was £497.0k (2015: £429.0k) which is within the limit of £600k per annum set in the Company’s articles of association, which have been previously approved by shareholders. A resolution will be considered at the AGM to be held on 2 August 2016 proposing the limit for the fees paid to the chairman and non-executive directors be increased to £750k per annum.

WS Atkins plc Annual Report 2016

108

Remuneration report

Annual remuneration report continued Implementation of remuneration policy: non-executive directors Fees The Board, on the recommendation of the executive directors, approved the changes to the fees paid to non-executive directors set out in table 25:

Table 25: Chairman and non-executive directors’ annualised fees Basic annual fee

2016/17

2015/16

£210,500

£207,000

£46,000

£45,000

Committee chairman fees Paid roles3

2016/17

2015/16

n/a

n/a

n/a

–

–

–

Committee membership fees Paid roles3

2016/17

2015/16

n/a

n/a

n/a

1

£4,200

£4,000

Total annualised fees

2015/16

% increase in fees

£210,500 £207,000

1.7%

2016/17

Chairman Allan Cook1 Non-executive directors Catherine Bradley Fiona Clutterbuck

£50,200

£49,000

2.4%

£51,650

£50,500

1

£8,200

£8,000

1

£4,200

£4,000

£64,050

£62,500

2.5%

Allister Langlands

£46,000

£45,000

1

£8,200

£8,000

1

£4,200

£4,000

£58,400

£57,000

2.5%

Thomas Leppert

£46,000

£45,000

–

–

–

1

£4,200

£4,000

£50,200

£49,000

2.4%

Raj Rajagopal

£46,000

£45,000

–

–

–

2

£8,400

£8,000

£54,400

£53,000

2.6%

£46,000

£45,000

–

–

–

1

£50,200

£49,000

2.4%

£492,150

£482,500

£16,400

£16,000

£537,950 £526,500

2.2%

2

Gretchen Watkins Total

£4,200

£4,000

£29,400

£28,000

1. The basic annual fee for the Chairman is inclusive of all committee roles he undertakes. 2. Fiona Clutterbuck’s basic annual fee includes an additional fee of £5,650 (2015/16: £5,500) to reflect the additional responsibilities of her role as senior independent director. 3. Based on committee membership as at 15 June 2015. No fee is paid in respect of chairmanship or membership of the Nomination Committee.

The average increase to the total annualised fees paid to the chairman and non-executive directors with effect from 1 April 2016 is 2.2% compared with the 2.4% average salary increase for all employees across the Group. The non-executive directors’ fees includes a 5% increase in the committee membership fees, which is the first since 1 April 2012. Payments to past non-executive directors (audited) Lord Boyce retired from the Board on 31 July 2013. Rodney Slater retired from the Board on 30 July 2014. Both continue to provide consultancy services to the Group.

WS Atkins plc Annual Report 2016

Governance > Remuneration report

109

The Remuneration Committee
 The Remuneration Committee is a committee of the Board. Its terms of reference are available on the Company’s website www.atkinsglobal.com/investors_remuneration 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. 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 table 26.

STRATEGIC REPORT

Other Information

Theme

Agenda items

Best practice

• Consideration of latest remuneration best practice guidance • Review of the Committee’s remuneration advisor and fees concluding with the subsequent appointment of Mercer • Introduction of clawback policy for annual bonus, LTIP and LGU awards, in line with Code requirements

Directors’ and • Consideration and approval of bonus scheme payments to the executive directors for 2014/15 company secretary’s • Interim review of executive directors’ performance against personal performance targets for 2015/16 remuneration • Consideration of EBS structure and financial targets for 2016/17

GOVERNANCE

Table 26: Key matters discussed during the year

• Consideration and approval of executive directors' personal performance targets for 2016/17 bonus • Consideration and approval of remuneration, bonus principles and quantum for the executive directors and company secretary for 2016/17 • Consideration of LTIP performance conditions, including performance targets, for awards to be granted in 2016/17 • Consideration and approval of the chairman’s fee for 2016/17 • Consideration of remuneration practice for Group employees • Review of bonus scheme payments to the senior leadership team for 2014/15 • Consideration of 2015/16 cash conversion targets for senior management under the EBS • Review of remuneration, bonus principles and quantum for the senior leadership team for 2016/17 Share plans

• Consideration of proposed revised LTIP subject to shareholder approval at 2016 AGM • Consideration and approval of performance condition outturn in respect of LTIP awards granted during 2012 • Consideration and approval of adjustments made to ensure that the EPS performance condition is measured on the same accounting basis during the respective performance period for LTIP awards

FINANCIAL STATEMENTS

Employee remuneration (including senior management)

• Consideration and approval of 2015 share plan awards • Review of share plan hedging arrangements and dilution • Performance monitoring of LTIP awards • Approval of non-material share plan administration and rule changes • Annual review of executive directors’ shareholdings and expenses for 2014/15

INVESTOR INFORMATION

Reporting

• Annual review of the chairman’s expenses for 2014/15 • Consideration and approval of the remuneration report for 2014/15

WS Atkins plc Annual Report 2016

110

Remuneration report

Annual remuneration report continued Committee membership The Committee met five times during the year (2015: five). The independent non-executive directors who served on the Committee during the year and their attendance at meetings is shown in the Corporate governance report (page 62). Gretchen Watkins joined the Committee on 1 June 2016. Fiona Clutterbuck became acting chairman on 14 June 2016, succeeding Raj Rajagopal. Committee meetings are attended by the Group HR director. The chairman of the Board, the CEO and the Group reward director 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 was supported by Mercer Limited (Mercer) which is a signatory to the Remuneration Consultants Group Code of Conduct. In addition, the Committee received advice from both Ashurst and Tapestry on legal matters. Table 27 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. Following a competitive review and selection process, the Committee appointed Mercer to replace Towers Watson Limited as its advisor during the year. Mercer's acquisition of Kepler Associates has provided increased experience of FTSE 100 and FTSE 250 remuneration committee advisory work which the Committee can draw upon. Each year the Committee assesses the advice it has received and is satisfied that the advice received during the year has been objective and independent.

Table 27: Advisors to the Committee Advisor

Services provided

Mercer

Advice on remuneration policy and structure including independent advice on proposed LTIP and performance conditions

Fees £55,645

Fee basis

Other services provided to the Group

Both fixed fee and time plus expenses basis

Supporting management, with the approval of the Committee, on matters relating to: • remuneration and benefits for senior management and the wider workforce • talent management (below executive director level).

Ashurst

Legal services, principally assisting with the drafting of last year’s Remuneration report

£1,660

Time plus expenses

Ashurst is one of a number of legal firms that provide legal advice and services to the Company on a range of matters.

Tapestry

Legal services, principally the drafting of the clawback provisions for the EBS, LTIP and LGU

£2,766

Time plus expenses

Tapestry provides legal advice in relation to our share plans.

The Committee also consulted the chairman of the Board, the CEO, the Group HR director, the company secretary and the Group reward director regarding remuneration policy. 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. In line with best practice, the Committee ensures that the number of new ordinary shares issued in any 10-year period does not exceed 10% of the Company’s issued share capital under all the Company’s share plans and does not exceed 5% under the LTIP, the LGU and any other executive share plan of the Company (executive schemes). At 31 March 2016, the EBT held 2,606,304 shares (2015: 2,730,695) to hedge outstanding awards over 3,328,913 shares (2015: 3,985,588) and 509,437 units (2015: 451,420). Using an approximation of one unit to one share, at this date the EBT held shares to satisfy 68% (2015: 62%) of all outstanding awards. In addition, as at 31 March 2015, 213,461 shares (2015: 213,461) were held in a separate EBT which are available to satisfy future awards granted under an all-employee share plan arrangement. No new issue shares have been used to satisfy share awards since 2005 and, to date, no treasury shares have been used.

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111

Outside appointments for executive directors Uwe Krueger is currently a non-executive director of the companies listed in table 28 and retains the fees payable, as outlined in respect of these appointments.

Table 28: Non-executive remuneration for executive directors Executive director

Organisation name

Uwe Krueger

Aggreko plc (UK)

• £61,000 per annum (with effect from 1 July 2015)

Remuneration basis

ONTEX S.A. (Zele, Belgium)

• €75,000 per annum

SUSI Partners AG (Zurich, Switzerland)

• €30,000 of which €10,000 is paid in cash and €20,000 in share options

STRATEGIC REPORT

Governance > Remuneration report

Shareholder voting and engagement The voting results for last year’s Annual remuneration report and the results of the binding vote for the remuneration policy from the 2014 AGM are set out in table 29.

Resolution

Votes for (m)

% against

Total votes cast (m)

Votes withheld (m)

4.75

7.11

66.80

0.02

7.07

10.55

67.03

0.49

% for

Votes against (m)

62.05

92.89

59.96

89.45

2015 AGM Approval of the annual remuneration report 2014 AGM Approval of the remuneration policy

GOVERNANCE

Table 29: Shareholder voting results

The Committee and Board were pleased to see an increase in support for the Annual remuneration report in 2015. Approved by the Board and signed on its behalf by

FINANCIAL STATEMENTS

Fiona Clutterbuck Acting chairman of the Remuneration Committee

INVESTOR INFORMATION

15 June 2016

WS Atkins plc Annual Report 2016

112

Independent auditor’s report to the members of WS Atkins plc Report on the financial statements Our opinion In our opinion: • WS Atkins plc’s Group financial statements and Company financial statements (the Financial Statements) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 March 2016 and of the Group’s profit and the Group’s and the 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 (EU) • the Company Financial Statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006 • the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the International Accounting Standard Regulation. What we have audited WS Atkins plc’s financial statements comprise: • the Consolidated and Parent Company Balance Sheets as at 31 March 2016 • the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the year then ended • the Consolidated and Parent Company Statements of Cash Flows for the year then ended • the Consolidated and Parent Company Statements of Changes in Equity for the year then ended • the notes to the Financial Statements, which include a summary of significant accounting policies and other explanatory information. Certain required disclosures 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. The financial reporting framework that has been applied in the preparation of the Financial Statements is applicable law and IFRSs as adopted by the EU and, as regards the Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. Our audit approach Context WS Atkins plc is listed on the London Stock Exchange. The business is involved in a large number of revenue contracts providing design engineering and project management consultancy services and, as a result, the accounting for these is an important area of focus. Our 2016 audit was planned and executed having regard to the fact that the Group’s operations were largely unchanged from the previous year. In light of this, our approach to the audit in terms of scoping and areas of focus was similar to that undertaken in 2015. Overview

• Overall Group materiality: £6.5 million (2015: £5.6m) which represents 5% of profit before tax

• The focus of our work was on the UK and Europe, North America, Middle East and Energy operations. In addition we receive reporting from Hong Kong to ensure sufficient coverage across all reporting segments • Timing and accuracy of contract revenue recognition • Goodwill impairment assessment, particularly in the Group’s North America and global oil and gas cash generating unit • Valuation of net retirement plan liabilities • Provisions for uncertain tax positions • Captive insurance claim provisions

WS Atkins plc Annual Report 2016

113

The scope of our audit and our areas of focus We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (ISAs (UK & Ireland)). We designed our audit by determining materiality and assessing the risks of material misstatement in the Financial Statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

STRATEGIC REPORT

Governance > Independent auditor’s report

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as ’areas of focus‘ in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the Financial Statements as a whole, and any comments we make on the outcome of our procedures should be read in this context. This is not a complete list of all risks identified by our audit. Area of focus

How our audit addressed the area of focus

The Group enters into contracts, many of which are complex and long term in nature and can span a number of reporting periods. The total amount of revenue and profit to be recognised under a contract can be affected by changes in conditions and circumstances over time, such as:

We selected a number of contracts, using risk based criteria, which included individual contracts: • with significant revenue recognised in the year or • with forecast losses or • with significant unbilled work-in-progress balances or • that had been identified by management as higher risk.

Variations can arise from changing client specifications, changes to the job based on unforeseen circumstances (e.g. macroeconomic factors), as well as from inefficiencies on the part of either party. There can be some uncertainties, therefore, in determining the amounts to be recovered from any additional work performed.

To assess whether revenue and profit is accurately recorded, we tested the forecast costs to complete on a sample of contracts by obtaining an understanding from project managers as to how they had estimated these costs, challenging the assumptions, for example by assessing forecast hours against historical and current run rates underpinning those estimates, evaluating the outturn of previous estimates and agreeing the actual costs incurred post-year end to the forecast costs for the period. We also assessed how the project managers determined that the stage of completion was correctly calculated and the appropriateness of variations recognised by obtaining their calculations and agreeing the inputs to documentary evidence or our independently formed expectation as appropriate. We found that the costs to complete and variations taken to value were appropriate.

The timing of revenue recognition is subject to judgements surrounding the costs expected to be incurred in completing the work, as revenue on fixed price contracts is recognised on a percentage completion basis. There is also the opportunity to misstate the amount of variations expected.

For an additional sample, we tested the 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. This was tested by checking electronic sign off by a suitable individual. No significant issues were noted from our work.

Given the degree of subjectivity involved in determining costs to complete and the magnitude of variations, there is also scope for error in the calculation of revenue and the opportunity to misstate the allocation of revenue between reporting periods.

To test the timing of contract revenue, we challenged senior management's judgements on the completeness of work for our sample of contracts by checking original contracts, amendments to contracts, where applicable (e.g. due to agreed variations), and checking that the contractual milestones had been reached. We also read and considered the implications of correspondence with customers (both upon the acceptance of work done and relating to disputes).

• variations to the original contract terms • cost overruns • scope changes that require further negotiation and settlement.

The risk is, therefore, that contract revenue is not recognised in the correct period or that revenue and associated profit is misstated.

No significant issues were noted from our work.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

We focused on this area because the timing of revenue recognition, forecasts of costs to complete and the recognition of variations on fixed price contracts have inherent complexities in the design, engineering and construction industries.

We evaluated the IT systems used in the determination of revenue recognition by testing access and change management controls. We also tested the internal controls over the timing of revenue recognition in the Financial Statements. Based on the results of this testing, we placed a high level of reliance on controls for the purposes of our testing of revenue and designed our further testing accordingly.

INVESTOR INFORMATION

Refer to Audit Committee report (page 75) and Revenue recognition and contract accounting (page 130).

GOVERNANCE

Timing and accuracy of contract revenue recognition

114

Independent auditor’s report continued Area of focus

How our audit addressed the area of focus

Goodwill impairment assessment, particularly in the Group’s North America and global oil and gas cash generating units Refer to Audit Committee report (page 75), Intangible Assets page 132 and notes (pages 150 to 153). We focused on this area because the determination of whether or not an impairment charge is required involves significant judgement, including forecasting the future results of the business by estimating future sales growth rates, profit margins and inflation rates and determining the discount rate for the calculations. We particularly focused on the goodwill held in respect of the Group's North America and global oil and gas cash generating units as these together account for £179.3m (71%) of the total goodwill of £253.2m and have the least relative headroom. No impairment charge has been recognised in the year. IFRSs require complex and often detailed disclosure in the financial statements about goodwill and impairment. In addition to considering the need for any impairment charge, we focused on these disclosures because they form a valuable communication, enabling users of the Financial Statements to understand the basis for any impairment recognised or not recognised.

We evaluated the directors’ future cash flow forecasts and the process by which they were drawn up, including comparing them to the latest Boardapproved budgets, and testing the underlying calculations. We challenged the directors' key assumptions for: • short-term sales growth rates and profit margins in the forecasts by comparing them to short-term historical results and economic industry forecasts • long-term growth rates in the forecasts by comparing them to long-term historical results and economic industry forecasts • the discount rate, by assessing the cost of capital for all cash generating units (CGUs), using our specialist valuations knowledge and comparing the Company’s key inputs to externally derived data. We compared the actual results for the financial year ended 31 March 2016 to the figures included in the prior year impairment models to consider whether any forecasts included assumptions that, with hindsight, had been optimistic. Actual performance in the Group's North America and global oil and gas businesses were found to be lower than expected so we checked and found that the directors had appropriately reflected this in the cash flow models for the financial year ended 31 March 2016. Using our own independent analysis, we performed sensitivity analysis around the key drivers of the value in use, which were: • the discount rate • the projected operating profit margins to identify how much each of these key drivers needed to change, either individually or collectively, before the goodwill was impaired. 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 considered the related disclosures in note 15 to the Financial Statements (page 150) by checking that they were compliant with IFRSs and that their presentation was consistent with our understanding of the key issues in this area. We found that they appropriately describe the inherent degree of subjectivity in the estimates and the potential impact on future periods of revisions to these estimates, including specific disclosures on the key assumptions most sensitive to reasonable possible change.

WS Atkins plc Annual Report 2016

Governance > Independent auditor’s report

Valuation of net retirement plan liabilities Refer to notes (page 173). The Group operates two significant defined benefit plans with total net post-retirement liabilities of £265.3m which are significant in the context of the overall balance sheet of the Group: the Atkins Pension Plan and the Railways Pension Scheme. We focused on this area because the valuation of plan liabilities requires significant levels of judgement and technical expertise in choosing appropriate assumptions. Changes in a number of key assumptions (including salary increases, inflation, discount rates and mortality) can have a material impact on the calculation of the liability. There is also some judgement in the measurement of the fair value of pension assets giving rise to a risk of material misstatement in their valuation.

We liaised with the Group’s actuaries and used our own actuarial specialists to evaluate the directors' assessment of the assumptions made in relation to the valuations of the liabilities and assets in the pension plans. We compared the assumptions around salary increases and mortality rates to national and industry averages. We checked with the Group’s actuaries that there had been no significant events or settlements that would impact the current pension balances and disclosures.

STRATEGIC REPORT

How our audit addressed the area of focus

We tested the Group’s contributions to the bank statements and the pensions paid out of the schemes by tracing them to the pension scheme bank accounts. We also tested the valuations of pension plan liabilities and assets as follows: • to test the inputs to the calculation of the liabilities, we compared the discount and inflation rates used in the valuation of the pension liabilities to our internally developed benchmarks and found that they were consistent • to test the valuation of the assets, we obtained third party confirmations on ownership and valuation of pension assets. We found these confirmations to be consistent with the amounts disclosed in the Financial Statements. The evidence we obtained supported the carrying value of the net retirement plan liabilities.

GOVERNANCE

Area of focus

115

The Group operates in a complex multinational tax environment and there are open tax and transfer pricing matters with UK and overseas tax authorities. In addition, from time to time the Group enters into transactions with complicated accounting and tax consequences.

We evaluated and challenged management's rationale for the level of provisions held. Where relevant, we obtained and assessed supporting documentation used by management to formulate the provisions, and considered the reasonableness of management’s best estimate assessments. To do this:

We focused on this area due to the judgement required in assessing the completeness and valuation of provisions to cover the risk of challenge of certain of the Group's tax positions.

• we assessed the impact of tax rate changes and other factors on the current tax charge • we considered the status of recent and current tax enquiries in the UK and the US, and the macro-tax environment in each territory • we considered the sensitivity of management’s probability estimates used to calculate the value of provisions, where relevant • we discussed with management all issues known to us, and considered the sufficiency of provisions in light of the matters discussed.

INVESTOR INFORMATION

The evidence we obtained supported the amounts provided for uncertain tax positions.

FINANCIAL STATEMENTS

Provisions for uncertain tax positions

WS Atkins plc Annual Report 2016

116

Independent auditor’s report continued Area of focus

How our audit addressed the area of focus

Captive insurance claim provisions The Group operates a captive insurance company, which provides self-insurance against claims such as professional indemnity and income protection. The most significant provisions relate to alleged deficiencies found in work performed by the Group. We focused on this area because the determination of the size of the provisions held and the settlement amounts are inherently judgemental.

We obtained the Group’s schedule for the professional indemnity claims and checked it was complete by comparing it to Board and committee minutes and certain relevant correspondence with the Group’s legal counsel. For each material claim, we discussed the issue with the Group’s internal legal counsel and management of the captive insurance company in order to understand the latest position of the proceedings and assess the directors’ views as to the strength of the claim against the Group. We obtained a schedule from management detailing the income protection claim provisions per underwriting year. We discussed the controls in place around the claims cycles with management and tested that controls had been working during the year. We checked year-end provisions to Board and committee minutes and to claims schedules provided by the Group's claims specialists and evaluated the specialists as being suitably qualified or experienced. We sought management explanation for significant movements in the period and substantiated management’s claims by confirming with insurers, legal correspondence, where possible, and the Group’s legal counsel. From the evidence obtained, we consider the level of provisioning at the balance sheet date not to be materially misstated.

How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the Group operates. The Group reports its operating results and financial position in five segments, being UK and Europe, North America, Middle East, Asia Pacific and Energy. The Group Financial Statements are a consolidation of the Group's operating businesses and central functions. The Group's operating reporting units vary significantly in size, the most significant being the UK and Europe. For the purposes of our scoping we divided this reporting unit further by identifying those significant areas where we focused our work. This included performing work on the shared service facility, giving us comfort over the centralised processes in the UK, and the key UK operating divisions selected based on their size or risk characteristics (e.g. transportation). We also performed an audit of the complete financial information of North America, the Middle East and Energy. We issued instructions to our overseas teams, which included guidance on the areas of focus for the audit; we then had regular communication with them and a senior member of the Group team also attended all planning and clearance meetings, either in person or by telephone. The Group engagement leader visited both North America and the Middle East for the clearance meetings. We performed further specific audit procedures over Group functions and areas of significant judgement, including taxation, goodwill, treasury, postretirement benefits and material litigation, at the Group’s head office. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and 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 Financial Statements as a whole as follows: Overall Group materiality

£6.5 million (2015: £5.6 million)

How we determined it

5% of profit before tax

Rationale for benchmark applied

Profit before tax is a generally accepted auditing benchmark in the absence of indicators that an alternative benchmark would be appropriate

We agreed with the Audit Committee that we would report to them individual misstatements identified during our audit above £0.6m (2015: £0.5m) as well as misstatements below that amount which, in our view, warranted reporting for qualitative reasons.

WS Atkins plc Annual Report 2016

117

Going concern Under the Listing Rules we are required to review the directors’ statement in relation to going concern (page 60). We have nothing to report having performed our review. Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the Financial Statements. We have nothing material to add or to draw attention to. As noted in the directors’ statement, the directors have concluded that it is appropriate to adopt the going concern basis in preparing the Financial Statements. 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 were 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 Company’s ability to continue as a going concern.

STRATEGIC REPORT

Governance > Independent auditor’s report

Other required reporting

• the information given in the Strategic report and the Directors’ report for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements • the information given in the Corporate governance report (page 66) with respect to internal control and risk management systems and about share capital structures is consistent with the Financial Statements.

GOVERNANCE

Consistency of other information Companies Act 2006 opinions In our opinion:

ISAs (UK & Ireland) reporting Under ISAs (UK & Ireland) we are required to report to you if, in our opinion: We have no exceptions to report

• information in the Annual Report is: –– materially inconsistent with the information in the audited Financial Statements or –– apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group and parent company acquired in the course of performing our audit or

We have no exceptions to report

• the section of the Annual Report, as required by provision C.3.8 of the Code, describing the work of the Audit Committee (page 73) does not appropriately address matters communicated by us to the Audit Committee.

We have no exceptions to report

The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group

FINANCIAL STATEMENTS

–– otherwise misleading • the statement given by the directors, in accordance with provision C.1.1 of the UK Corporate Governance Code (the Code), 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 and Company’s position and performance, business model and strategy (page 09) is materially inconsistent with our knowledge of the group and parent company acquired in the course of performing our audit

• the directors’ confirmation, in accordance with provision C.2.1 of the Code, that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity (page 37)

We have nothing material to add or to draw attention to

• the disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated

We have nothing material to add or to draw attention to

• the directors’ explanation, in accordance with provision C.2.2 of the Code, as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions (page 37).

We have nothing material to add or to draw attention to

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:

118

Independent auditor’s report continued Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust assessment of the principal risks facing the Group and the directors’ statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code, and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review. Adequacy of accounting records and information and explanations received Under the Companies Act 2006 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 or • 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 or • the Company’s 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. Directors’ remuneration Directors’ remuneration report – Companies Act 2006 opinion In our opinion, the part of the Remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. Other Companies Act 2006 reporting Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility. Corporate governance statement Under the Companies Act 2006 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 governance statement relating to 10 further provisions of the Code. We have nothing to report having performed our review.

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 (page 60), the directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the 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 Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

WS Atkins plc Annual Report 2016

119

What an audit of financial statements involves 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 the Company’s circumstances and have been consistently applied and adequately disclosed • the reasonableness of significant accounting estimates made by the directors

STRATEGIC REPORT

Governance > Independent auditor’s report

• the overall presentation of the Financial Statements. We primarily focus 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 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.

Christopher Burns (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London

GOVERNANCE

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

INVESTOR INFORMATION

FINANCIAL STATEMENTS

15 June 2016

WS Atkins plc Annual Report 2016

120

Financial Statements Contents Consolidated Income Statement

121

19 Deferred income tax

155

Consolidated Statement of Comprehensive Income

122

20 Financial risk management

157

Consolidated and Parent Company Balance Sheets

123

21 Financial instruments

165

Consolidated and Parent Company Statements of Cash Flows 124

22 Derivative financial instruments

167

Consolidated Statement of Changes in Equity

125

23 Other receivables

168

Parent Company Statement of Changes in Equity

126

24 Trade and other receivables

168

25 Financial assets at fair value through profit or loss

169

26 Cash and cash equivalents

169

27 Borrowings

170

28 Trade and other payables

172

29 Provisions for other liabilities and charges

172

30 Post-employment benefit liabilities

173

31 Other non-current liabilities

184

32 Ordinary shares

184

33 Share-based payments

185

34 Cash generated from/(used in) continuing operations

188

35 Analysis of net funds

188

36 Contingent liabilities

189

37 Operating lease arrangements

189

38 Capital and other financial commitments

189

39 Related party transactions

190

Notes to the Financial Statements 1 Accounting policies

127

2 Treasury policy and objectives

137

3 Segmental information

138

4 Joint ventures

140

5 Operating profit – analysis of costs by nature

141

6 Employee benefit costs

142

7 Net finance costs

143

8 Income tax expense

143

9 Net (loss)/profit on disposal of businesses

146

10 Business combinations

147

11 Exceptional items

148

12 Dividends

148

13 Earnings per share (EPS)

149

14 Parent Company Income Statement and Statement of Comprehensive Income

149

40 Events occurring after the reporting period

191

15 Goodwill

150

41 Details of related undertakings of WS Atkins plc

192

16 Other intangible assets

153

Five Year Summary

196

17 Property, plant and equipment

154

Investor Information

199

18 Investments in subsidiaries

155

Cautionary Statement

201

WS Atkins plc Annual Report 2016

Financial Statements > Consolidated Income Statement

121

Consolidated Income Statement

Note Revenue

3

Cost of sales Gross profit Administrative expenses Operating profit

3, 5

Group 2016 £m

Group 2015 £m

1,861.9

1,756.6

(1,109.2)

(1,049.2)

752.7

707.4

(609.3)

(588.9)

143.4

118.5

148.2

134.1

STRATEGIC REPORT

For the year ended 31 March 2016

Comprising 11

4.7

– Impairment of goodwill

15

–

(2.8)

(6.3)

(6.9)

– Amortisation of acquired intangibles – Deferred acquisition payments

(3.2)

(1.5)

143.4

118.5

9

(3.1)

0.4

1.1

2.2

3, 4

0.7

0.1

142.1

121.2

7

4.0

4.8

Finance costs

7

(15.0)

(19.3)

Net finance costs

7

(11.0)

(14.5)

Net (loss)/profit on disposal of businesses

10

(4.4)

Income from other investments Share of post-tax profit from joint ventures Profit before interest and tax Finance income

Profit before tax

131.1

106.7

139.0

121.9

4.7

(4.4)

Comprising – Underlying profit before tax – Exceptional items

11

– Impairment of goodwill

15

–

(2.8)

(6.3)

(6.9)

10

(3.2)

(1.5)

9

(3.1)

0.4

131.1

106.7

– Amortisation of acquired intangibles – Deferred acquisition payments – Net (loss)/profit on disposal of businesses

Income tax expense

8

Profit for the year

(27.7)

(21.0)

103.4

85.7

103.2

85.7

GOVERNANCE

– Exceptional items

FINANCIAL STATEMENTS

– Underlying operating profit

Owners of the parent Non-controlling interests

0.2 103.4

– 85.7

Earnings per share Basic earnings per share

13

106.0 p

87.8 p

Diluted earnings per share

13

103.0 p

85.4 p

Underlying diluted earnings per share

13

107.3 p

97.1 p

The notes on pages 127 to 195 are an integral part of these Financial Statements.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Profit attributable to:

122

Consolidated Statement of Comprehensive Income For the year ended 31 March 2016

Group 2016 £m

Group 2015 £m

103.4

85.7

30

8.3

6.0

30, 8

(5.7)

(1.5)

2.6

4.5

(1.0)

3.6

Net differences on exchange

18.6

20.7

Total items that may be reclassified subsequently to profit or loss

17.6

24.3

Note Profit for the year Other comprehensive income/(expense) Items that will not be reclassified to profit or loss Remeasurements of net post-employment benefit liabilities Income tax on items that will not be reclassified Items that may be reclassified subsequently to profit or loss Cash flow hedges

Other comprehensive income for the year, net of tax Total comprehensive income for the year

20.2

28.8

123.6

114.5

123.4

114.5

Attributable to: Owners of the parent Non-controlling interests Total comprehensive income for the year

The notes on pages 127 to 195 are an integral part of these Financial Statements.

WS Atkins plc Annual Report 2016

0.2 123.6

– 114.5

Financial Statements > Consolidated and Parent Company Balance Sheets

123

Consolidated and Parent Company Balance Sheets

Note

Group 2016 £m

Group 2015 £m

Company 2016 £m

Company 2015 £m

Goodwill

15

253.2

244.4

–

–

Assets Non-current assets Other intangible assets

16

46.8

54.3

–

–

Property, plant and equipment

17

51.9

53.6

–

–

Investments in subsidiaries

18

–

–

216.1

206.7

4

4.3

3.8

–

–

Deferred income tax assets

19

66.5

76.8

–

–

Derivative financial instruments

22

2.0

1.2

–

–

Other receivables

23

29.1

20.7

1.0

0.9

453.8

454.8

217.1

207.6

Investments in joint ventures

STRATEGIC REPORT

As at 31 March 2016

Trade and other receivables

24

480.0

476.5

339.5

169.6

Financial assets at fair value through profit or loss

25

32.9

33.4

–

–

Cash and cash equivalents

26

419.3

235.4

1.4

–

Derivative financial instruments

22

1.3

1.3

–

–

933.5

746.6

340.9

169.6

GOVERNANCE

Current assets

Liabilities Borrowings

27

(7.0)

(61.1)

(7.0)

(63.6)

Trade and other payables

28

(483.0)

(510.8)

(53.1)

(67.1)

Derivative financial instruments

22

(0.5)

(0.6)

–

–

(28.3)

(40.2)

–

–

(1.1)

(0.8)

–

–

(519.9)

(613.5)

(60.1)

(130.7)

413.6

133.1

280.8

38.9

(273.5)

(50.2)

Current income tax liabilities Provisions for other liabilities and charges

29

Net current assets Non-current liabilities Borrowings

27

(273.6)

(50.2)

Provisions for other liabilities and charges

29

(2.8)

(2.6)

–

Post-employment benefit liabilities

30

(285.8)

(316.6)

–

–

Derivative financial instruments

22

(1.0)

(0.2)

–

–

Deferred income tax liabilities

19

(11.7)

(10.1)

–

–

Other non-current liabilities

31

Net assets

3

–

–

(3.2)

(3.2)

(578.1)

(382.9)

(273.5)

(50.2)

–

289.3

205.0

224.4

196.3

FINANCIAL STATEMENTS

Current liabilities

Ordinary shares

32

Share premium account Merger reserve

0.5

0.5

0.5

0.5

62.4

62.4

62.4

62.4

8.9

8.9

8.9

8.9

Retained earnings

217.2

133.0

152.6

124.5

Equity attributable to owners of the parent

289.0

204.8

224.4

196.3

0.3

0.2

–

–

289.3

205.0

224.4

196.3

Non-controlling interests Total equity

The Financial Statements on pages 121 to 195 were approved by the Board on 15 June 2016 and signed on its behalf by: Prof Dr Uwe Krueger Heath Drewett Director Director The notes on pages 127 to 195 are an integral part of these Financial Statements.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Capital and reserves

124

Consolidated and Parent Company Statements of Cash Flows For the year ended 31 March 2016

Note

Group 2016 £m

Group 2015 £m

34

116.1

133.9

Company 2016 £m

Company 2015 £m

Cash flows from operating activities Cash generated from/(used in) operations

(10.5)

0.6

Interest received

3.6

4.9

3.0

3.2

Interest paid

(3.9)

(4.8)

(3.6)

(3.9)

Income tax paid

(36.8)

(17.8)

–

–

79.0

116.2

(11.1)

(0.1)

Net cash generated from/(used in) operating activities Cash flows from investing activities Acquisitions of subsidiaries – consideration

10

–

(57.2)

–

–

– cash acquired

10

–

3.9

–

–

–

(1.6)

Loans to joint ventures and other related parties Repayment of joint venture loans

1.6

Distributions received from joint ventures

–

Purchases of property, plant and equipment

17

–

–

–

0.7

–

–

(16.8)

(19.9)

–

–

2.5

0.1

–

–

–

3.3

–

–

1.1

2.2

–

–

–

–

56.2

40.7

Proceeds from disposals of property, plant and equipment Proceeds from disposal of businesses

–

–

9

Dividends received from other investments Dividends received Net disposal proceeds from/(purchase of) financial assets

35

0.5

(1.3)

–

–

Purchases of intangible assets

16

(3.0)

(5.4)

–

–

(14.1)

(75.2)

56.2

40.7

164.7

10.0

164.7

10.0

–

(10.0)

–

(10.0)

Net cash (used in)/generated from investing activities Cash flows from financing activities Proceeds of new bank loans Repayment of bank loans Redemption of loan notes receivable Finance lease principal payments

0.1

0.1

–

–

35

(0.1)

–

–

–

(13.0)

(15.0)

12

(36.2)

(33.4)

Purchase of own shares by employee benefit trusts Equity dividends paid to shareholders Loans granted to Group companies

–

–

Repayment of loans to Group companies

–

–

–

–

(36.2)

(33.4)

(179.7)

(13.0)

–

5.4

Net cash generated from/(used in) financing activities

115.5

(48.3)

(51.2)

(41.0)

Net increase/(decrease) in cash and cash equivalents

180.4

(7.3)

(6.1)

(0.4)

Cash and cash equivalents and bank overdraft at beginning of year

235.4

237.3

(2.6)

(2.4)

3.5

5.4

10.1

0.2

419.3

235.4

1.4

(2.6)

Exchange movements Cash and cash equivalents and bank overdraft at end of year

26, 27

The notes on pages 127 to 195 are an integral part of these Financial Statements.

WS Atkins plc Annual Report 2016

Financial Statements > Consolidated Statement of Changes in Equity

125

Consolidated Statement of Changes in Equity For the year ended 31 March 2016

Retained earnings £m

Total £m

Noncontrolling interests £m

Total equity £m

0.5

62.4

8.9

58.2

130.0

0.2

130.2

Profit for the year

–

–

–

85.7

85.7

–

85.7

Remeasurements of net post-employment benefit liabilities

–

–

–

6.0

6.0

–

6.0

Income tax on items that will not be reclassified Cash flow hedges

–

–

–

(1.5)

(1.5)

–

(1.5)

–

–

–

3.6

3.6

–

3.6

Net differences on exchange

–

–

–

20.7

20.7

–

20.7

Other comprehensive income for the year

–

–

–

28.8

28.8

–

28.8

Total comprehensive income for the year

–

–

–

114.5

114.5

–

114.5

–

–

–

(33.4)

(33.4)

–

(33.4)

Note Group Balance at 1 April 2014

Dividends provided for or paid

12

Share-based payments

33

–

–

–

8.6

8.6

–

8.6

Tax credit relating to share-based payments

–

–

–

0.1

0.1

–

0.1

Employee benefit trusts

–

–

–

(15.0)

(15.0)

–

(15.0)

Total contributions by and distributions to owners of the parent, recognised directly in equity

–

–

–

(39.7)

(39.7)

–

(39.7)

0.5

62.4

8.9

133.0

204.8

0.2

205.0

–

–

–

103.2

103.2

0.2

103.4

Balance at 31 March 2015 Profit for the year Remeasurements of net post-employment benefit liabilities

–

–

–

8.3

8.3

–

8.3

Income tax on items that will not be reclassified

–

–

–

(5.7)

(5.7)

–

(5.7)

Cash flow hedges

–

–

–

(1.0)

(1.0)

–

(1.0)

Net differences on exchange

–

–

–

18.6

18.6

–

18.6

Other comprehensive income for the year

–

–

–

20.2

20.2

–

20.2

Total comprehensive income for the year

–

–

–

123.4

123.4

0.2

123.6

Dividends provided for or paid

12

–

–

–

(36.2)

(36.2)

(0.1)

(36.3)

Share-based payments

33

–

–

–

9.4

9.4

–

9.4

Tax credit relating to share-based payments

–

–

–

0.6

0.6

–

0.6

Employee benefit trusts

–

–

–

(13.0)

(13.0)

–

(13.0)

Total contributions by and distributions to owners of the parent, recognised directly in equity

–

–

–

(39.2)

(39.2)

(0.1)

(39.3)

0.5

62.4

8.9

217.2

289.0

0.3

289.3

Balance at 31 March 2016

The merger reserve relates to the issue of shares in respect of previous acquisitions. The notes on pages 127 to 195 are an integral part of these Financial Statements.

WS Atkins plc Annual Report 2016

GOVERNANCE

Merger reserve £m

FINANCIAL STATEMENTS

Share premium account £m

INVESTOR INFORMATION

Ordinary shares £m

STRATEGIC REPORT

Attributable to owners of the parent

126

Parent Company Statement of Changes in Equity For the year ended 31 March 2016

Attributable to owners of the parent

Note

Ordinary shares £m

Share premium account £m

Merger reserve £m

Retained earnings £m

Noncontrolling Total interests £m £m

0.5

62.4

8.9

114.6

186.4

–

186.4

–

–

–

34.7

34.7

–

34.7

–

–

–

34.7

34.7

–

34.7

Total equity £m

Company Balance at 1 April 2014 Profit for the year

14

Total comprehensive income for the year Dividends provided for or paid

12

–

–

–

(33.4)

(33.4)

–

(33.4)

Share-based payments

33

–

–

–

8.6

8.6

–

8.6

Total contributions by and distributions to owners of the parent, recognised directly in equity

–

–

–

(24.8)

(24.8)

–

(24.8)

0.5

62.4

8.9

124.5

196.3

–

196.3

Balance at 31 March 2015 Profit for the year

14

Total comprehensive income for the year

–

–

–

54.9

54.9

–

54.9

–

–

–

54.9

54.9

–

54.9

Dividends provided for or paid

12

–

–

–

(36.2)

(36.2)

–

(36.2)

Share-based payments

33

–

–

–

9.4

9.4

–

9.4

Total contributions by and distributions to owners of the parent, recognised directly in equity

–

–

–

(26.8)

(26.8)

–

(26.8)

0.5

62.4

8.9

152.6

224.4

–

224.4

Balance at 31 March 2016

The merger reserve relates to the issue of shares in respect of previous acquisitions. The notes on pages 127 to 195 are an integral part of these Financial Statements.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

127

Notes to the Financial Statements For the year ended 31 March 2016

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 the Company 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 or IFRIC) 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. 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 preparation of the Consolidated Financial Statements, are in relation to contract accounting, including recoverability of receivables, goodwill impairment, defined benefit pension schemes, tax, research and development, and joint arrangements. These critical accounting policies are described in more detail below and have been annotated with CA . Changes in accounting policy and disclosure New and amended standards adopted by the Group There were no standards adopted by the Group for the first time for the financial year beginning on 1 April 2015 that had a material impact on the Group.

GOVERNANCE

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.

STRATEGIC REPORT

1 Accounting policies

The following IFRS and international accounting standards (IASs) and IFRIC interpretations have been adopted by the Group for the first time for the financial year beginning on 1 April 2015 and do not have a material impact on the Group: • Amendments to the following standards: – IAS 19, Defined benefit plans: Employee contributions

The Group has an unconditional right of refund of any remaining surplus on a winding up of the Atkins Pension Plan once all the interests of the members have been satisfied in accordance with the scheme rules. The International Accounting Standards Board published its exposure draft of amendments to IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, which proposes additional clarity on the role of trustees’ rights in an assessment of the recoverability of a surplus in an employee pension fund. The Group is currently undergoing a triennial valuation of the Atkins Pension Plan and will use this opportunity to assess the potential impact, if any, this exposure draft may have on the accounting for its retirement benefit schemes if adopted in its proposed form. The following accounting standards, interpretations and amendments have been issued by the IASB but had either not been adopted by the EU or were not yet effective in the EU for the financial year beginning 1 April 2015:

FINANCIAL STATEMENTS



• IFRS 9, Financial instruments • IFRS 15, Revenue from contracts with customers • IFRS 16, Leases

− IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint venture − IFRS 10, IFRS 12 and IAS 28: Investment entities: Applying the consolidation exemption − IFRS 11, Accounting for acquisitions of interests in a joint operation − IAS 1, Disclosure initiative − IAS 16 and IAS 38: Clarification of acceptable methods of depreciation and amortisation − IAS 27, Equity method in separate financial statements

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. The directors have made initial assessments of the impact of IFRS 15 and IFRS 9 and do not expect any material quantitative impact to the Group. The impact of IFRS 16, which was issued in January 2016, is currently being assessed. The Group will carry out a systematic review of all existing major contracts to ensure that the impact and effect of the new revenue standard is fully understood and changes to the current accounting procedures are highlighted and acted upon in advance of the effective date. The Group has chosen not to adopt any of the above standards and interpretations earlier than required.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

• Amendments to the following standards:

128

Notes to the Financial Statements continued For the year ended 31 March 2016

1 Accounting policies continued Going concern Having reassessed the principal risks, the directors considered it appropriate to adopt the going concern basis of accounting in preparing the Financial Statements. Basis of consolidation The Consolidated Income Statement and Balance Sheet include the accounts of the Group and 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. 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. CA

Joint arrangements The Group applies IFRS 11 to all joint arrangements. Under IFRS 11 a joint arrangement is an arrangement over which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The Group classifies its interests in joint arrangements as either joint ventures or joint operations. The Group holds 50% of the voting rights in some of its joint arrangements. However, the Group has joint control over these arrangements as under the respective contractual agreements unanimous consent is required from all parties to the agreements for all relevant activities. These joint arrangements are not structured through separate legal entities and the terms of the arrangements provide the Group and the other parties to the arrangements with the rights to the assets and obligations for the liabilities, or other facts and circumstances indicate this is the case. Therefore, these arrangements are classified as joint operations of the Group. Joint ventures A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and the carrying amount is increased or decreased thereafter to recognise the Group's share of the post-acquisition profits or losses. Losses of a joint venture in excess of the Group's interest in the joint venture are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture. Distributions received from an investee reduce the carrying amount of the investment.

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Joint operations A joint operation is a joint arrangement whereby the parties that have joint control have the rights to the assets and obligations for the liabilities relating to the arrangement, or that other facts and circumstances indicate that this is the case. The Group's share of assets, liabilities, revenue, expenses and cash flows are combined with the equivalent items in the Financial Statements on a line-by-line basis. Employee benefit trusts (EBTs) The accounts of the 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 the Company 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.

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

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.

GOVERNANCE

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.

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

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. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers (CODMs). The CODMs, who are responsible for allocating resources and assessing performance of the operating segments, have been identified as the chief executive officer (CEO) and the Group finance director. The Group's operating segments for management purposes reflect predominantly its key geographical markets. The segments are: UK 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.

FINANCIAL STATEMENTS

• all resulting exchange differences are recognised in other comprehensive income.

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.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Intersegment transfers and transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.

130

Notes to the Financial Statements continued For the year ended 31 March 2016

1 Accounting policies continued Underlying profit Underlying operating profit is reported before exceptional items, impairment of goodwill, amortisation and impairment of intangible assets recognised on acquisition and deferred acquisition payments, and relates to continuing operations. CA

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. The Group enters into a number of different forms of contracts with clients, the most common being fixed price lump sum contracts and time and materials contracts based on hourly rates. Some of the fixed price lump sum contracts may be linked to the capital cost of works or a profit/(loss) sharing mechanism. 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. 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. 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. 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. 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 management believe 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.

WS Atkins plc Annual Report 2016

Retirement benefit schemes The Group operates various post-employment schemes, including both defined contribution (DC) and defined benefit (DB) pension plans. A DC 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 DB 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 DB 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. DB pension costs are categorised as follows:

• administrative expenses • net interest expense or income • remeasurement. The net retirement benefit liabilities recognised in the Consolidated Balance Sheet represent the actual deficit in the Group's defined benefit plans.

GOVERNANCE

• service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements)

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 30 to the Financial Statements (page 181). 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 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 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. 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.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

For DC plans, the Group's 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.

INVESTOR INFORMATION

CA

131

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

132

Notes to the Financial Statements continued For the year ended 31 March 2016

1 Accounting policies continued CA

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 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. 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 income 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 £3.2m (2015: £3.5m) have not been recognised due to the uncertainty of timing of utilisation.

CA

Research and development (R&D) All research and development expenditure is written off to the Consolidated Income Statement as incurred. In the UK, the Group has early adopted the R&D expenditure credit regime with effect from 1 April 2013. These credits have characteristics more akin to government grants than income taxes and therefore are offset against the relevant expenditure in the income statement rather than via the tax charge. The credits are recognised to the extent that there is reasonable assurance that they will be received albeit that the claim process takes place sometime after the original expenditure was incurred.

CA

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 acquired business. Goodwill is stated at cost less accumulated impairment. 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 the 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.

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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). 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 20 years. Acquired customer relationships are stated at cost less accumulated amortisation and impairment.

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

Backlog orders are recognised at fair value at the acquisition date and amortised over their estimated useful lives of up to three years. Backlog orders are stated at cost less accumulated amortisation and impairment.

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.

GOVERNANCE

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.

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.

FINANCIAL STATEMENTS

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 of between three and 13 years. 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.

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: – 10 to 50 years – over the life of the lease – three to 12 years.

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 Consolidated Income Statement.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Freehold buildings Short term leasehold property Plant, machinery and vehicles

134

Notes to the Financial Statements continued For the year ended 31 March 2016

1 Accounting policies continued Sale and leaseback transactions A sale and leaseback transaction occurs when the Group sells an asset and reacquires the use of the asset by entering into a lease with the buyer. The accounting treatment of the sale and leaseback depends upon the substance of the transaction, whether or not the sale was made at the asset's fair value, and the relationship with the buyer. For sale and operating leasebacks, the assets are sold at fair value and accordingly the profit or loss from the sale is recognised immediately in the Group's Income Statement. The operating lease payments are recognised in accordance with the accounting policy for leases, as disclosed below. 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. Financial assets Classification The Group classifies its financial assets into the following categories: at fair value through profit or loss, loans and receivables, and available-for-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 20. 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 20. The fair value of financial instruments for an asset or liability that are not based on observable market data (that is, unobservable inputs) are Level 3 financial instruments, see note 20. 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.

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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.

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

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.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the Consolidated Income Statement. Interest on available-for-sale financial assets calculated using the effective interest method is recognised in the Consolidated 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.

GOVERNANCE

Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income.

Evidence of impairment may include indications that the debtor, 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 indicates 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 Consolidated 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.

FINANCIAL STATEMENTS

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.

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 related objectively to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the Consolidated Income Statement.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

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.

136

Notes to the Financial Statements continued For the year ended 31 March 2016

1 Accounting policies continued Inventories Inventories are stated at cost less impairment. Cost is determined using the first in, first out method. Trade and other receivables Trade receivables are amounts due from customers for services performed in the ordinary course of business. Amounts recoverable on contracts, amounts due from subsidiary undertakings, amounts due from joint ventures, deferred finance costs, prepayments and accrued income and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. 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 22. 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. 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. 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 Consolidated 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.

WS Atkins plc Annual Report 2016

137

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.

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

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 can be reliably estimated.

GOVERNANCE

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.

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.

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.

2 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 for the detailed review of the policies to the Audit Committee.

FINANCIAL STATEMENTS

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.

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 Group funds its ongoing activities through cash generated from its operations and, where necessary, borrowings and finance leases. The Group’s debt facilities are described in note 27 to the Financial Statements (page 171). Utilisation of the Group’s facilities is a consequence of prior and current year acquisitions and ongoing organic growth. As at 31 March 2016 the Group had £71.9m of undrawn committed borrowing facilities available (2015: £138.1m). There have been no significant changes to the Group’s treasury procedures, requirements and authority levels during the year.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

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 20 to the Financial Statements (page 157).

138

Notes to the Financial Statements continued For the year ended 31 March 2016

3 Segmental information The chief operating decision makers (CODMs) have been identified as the CEO and the Group finance director. The CEO and the Group finance director review the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. The Group's operating segments for management purposes predominantly reflect its key geographical markets. The segments are: UK and Europe, North America, Middle East, Asia Pacific and Energy. Details of the business activities and the economic environment in which each segment operates are given in the Our segments and Segmental performance sections. The CEO and the Group finance director assess the performance of the operating segments based on underlying operating profit before interest and tax. Information provided to the CEO and the Group finance director is measured in a manner consistent with that in the Financial Statements. a) Group business segments Revenue and results Share of postOperating tax profit from margin joint ventures % £m

External revenue £m

Inter segment trade £m

Revenue £m

Operating profit/(loss) £m

UK and Europe

906.9

36.7

943.6

73.8

7.8

0.3

North America

362.0

0.6

362.6

20.4

5.6

–

Middle East

285.0

(36.7)

248.3

29.5

11.9

–

Asia Pacific

94.6

11.5

106.1

8.5

8.0

–

213.4

(12.1)

201.3

16.7

8.3

0.4

1,861.9

148.9

8.0

0.7

2016

Energy Total for segments

1,861.9

–

Group items: Joint ventures reported above

–

–

–

(0.7)

Unallocated central items

–

–

–

(4.8)

Total for Group

1,861.9

–

1,861.9

143.4

– – 7.7

0.7

Share of post-tax (loss)/ Operating profit from margin joint ventures % £m

External revenue £m

Inter segment trade £m

Revenue £m

Operating profit/(loss) £m

UK and Europe

872.4

31.4

903.8

60.7

6.7

North America

340.4

1.0

341.4

20.0

5.9

– –

2015

(0.4)

Middle East

238.2

(21.5)

216.7

22.5

10.4

Asia Pacific

102.1

7.6

109.7

9.8

8.9

–

Energy

200.5

(18.5)

182.0

20.4

11.2

0.5

1,753.6

133.4

7.6

0.1

Total for segments

1,753.6

–

Group items: Joint ventures reported above Unallocated central items Total for Group

–

–

–

(0.1)

–

3.0

–

3.0

(14.8)

–

1,756.6

–

1,756.6

118.5

6.7

0.1

Unallocated central items reported in the year ended 31 March 2016 comprise: £6.3m of intangible asset amortisation relating to the acquisitions of The PBSJ Corporation (PBSJ), Confluence Project Management Pte. Ltd (Confluence), Nuclear Safety Associates, Inc. (NSA), Houston Offshore Engineering, LLC (HOE) and Terramar AS (Terramar); £3.3m of external fees in relation to the acquisition of the projects, products and technology (PP&T) segment of EnergySolutions; £3.2m of deferred payment arising on the acquisition of HOE; £1.5m pension curtailment gain and £6.5m gain on disposal of part of the Group's freehold property at Woodcote Grove.

WS Atkins plc Annual Report 2016

Unallocated central items reported in the year ended 31 March 2015 comprise: £6.9m of intangible asset amortisation relating to the acquisitions of PBSJ, Confluence, NSA, HOE and Terramar; impairment of goodwill for the European aerospace business of £2.8m; £4.4m of external fees in relation to the pursuit of an unsuccessful acquisition; £1.5m of deferred payments arising on the acquisition of HOE; release of a £3.0m provision relating to the previously disposed of Asset Management business and £2.2m settlement of longstanding enquiries by the Department of Justice and the Securities and Exchange Commission. A reconciliation of segmental operating profit to profit before tax is provided as follows: Group

Operating profit Net (loss)/profit on disposal of businesses

2016 £m

2015 £m

143.4

118.5

(3.1)

0.4

Income from other investments

1.1

2.2

Share of post-tax profit from joint ventures

0.7

0.1

142.1

121.2

Profit before interest and tax Finance income

4.0

4.8

Finance costs

(15.0)

(19.3)

Net finance costs

(11.0)

(14.5)

Profit before tax

131.1

106.7

Net assets/ (liabilities) £m

Investments in joint ventures £m

Capital expenditure £m

Depreciation, amortisation and impairment £m

STRATEGIC REPORT

139

GOVERNANCE

Financial Statements > Notes to the Financial Statements

Total segment liabilities £m

UK and Europe

584.2

(264.7)

319.5

4.0

8.6

13.0

North America

449.8

(57.7)

392.1

–

4.8

4.3

Middle East

144.7

(87.1)

57.6

–

3.4

2.6

Asia Pacific

68.0

(47.2)

20.8

–

1.4

2.7

112.2

(26.0)

86.2

0.3

1.7

1.2

1,358.9

(482.7)

876.2

4.3

19.9

23.8

28.4

(615.3)

(586.9)

–

–

6.3

1,387.3

(1,098.0)

289.3

4.3

19.9

30.1

Net assets/ (liabilities) £m

Investments in joint ventures £m

Capital expenditure £m

Depreciation, amortisation and impairment £m

(293.7)

228.1

3.7

30.0

15.2 4.1

Energy Total for segments Group items: Unallocated central items Total for Group

2015

Total segment assets £m

Total segment liabilities £m

UK and Europe

521.8

North America

300.6

(77.2)

223.4

–

2.5

Middle East

152.0

(94.0)

58.0

–

2.0

1.4

Asia Pacific

61.6

(41.9)

19.7

–

0.7

0.7

Energy Total for segments

141.1

(30.2)

110.9

0.1

45.3

1.0

1,177.1

(537.0)

640.1

3.8

80.5

22.4

24.3

(459.4)

(435.1)

–

1,201.4

(996.4)

205.0

3.8

Group items: Unallocated central items Total for Group

– 80.5

9.7 32.1

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

2016

Total segment assets £m

FINANCIAL STATEMENTS

Balance Sheet

140

Notes to the Financial Statements continued For the year ended 31 March 2016

3 Segmental information continued a) Group business segments continued Revenue and results continued 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. 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

2016 £m

2015 £m

2016 £m

2015 £m

UK

960.9

921.7

100.7

98.8

US

398.6

373.4

237.5

231.4

Other

502.4

461.5

47.1

46.6

1,861.9

1,756.6

385.3

376.8

Total for Group

Non-current assets exclude deferred tax assets and derivative financial instruments. c) Major customers In the year ended 31 March 2016 revenue from the UK Government represents approximately £200.3m of the Group's total revenue and is included within the UK and Europe and Energy segments. In addition revenue of approximately £156.7m (2015: £191.0m) is derived from one single external customer and is attributable to the UK and Europe operating segment.

4 Joint ventures Aggregate financial information for all individually immaterial joint ventures. Income Statement – continuing operations Group

Share of post-tax profit from joint ventures

2016 £m

2015 £m

0.7

0.1

2016 £m

2015 £m

4.3

3.8

Balance Sheet

Investments in joint ventures

The Group's joint ventures are detailed in note 41.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

141

Group Note

2016 £m

2015 £m

16

11.9

13.0

Operating profit is arrived at after charging/(crediting): Amortisation and impairment of intangibles Impairment of goodwill

15

–

2.8

Deferred acquisition payments

10

3.2

1.5

Depreciation of property, plant and equipment

17

18.2

16.3

6

1,095.3

940.8

– increase in provisions

24

9.4

14.4

– release of provisions

24

(11.1)

(10.4)

Employee benefit costs

STRATEGIC REPORT

5 Operating profit – analysis of costs by nature

Impairment of trade receivables/(reversal of impairment)

(6.7)

Loss on sale of intangible assets

–

–

0.1

4.9

(1.1)

Payments under operating leases

60.8

56.3

Receipts under operating leases

(4.5)

(4.0)

Research and development expenditure credit (RDEC)

(5.4)

(5.0)

Net foreign exchange losses/(gains)

GOVERNANCE

Profit on sale of property, plant and equipment

Company operating profit was arrived at after generating £nil of realised profit on disposal of investments (2015: £nil). 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:

2015 £m

0.3

0.3

– UK

0.4

0.4

– Non-UK

0.6

0.6

Audit-related assurance services

0.1

0.1

Total audit services

1.4

1.4

Taxation compliance services

1.5

1.0

Taxation advisory services

1.4

–

Services connected with an unsuccessful acquisition pursuit (refer note 11)

–

1.1

Other

–

0.1

Total non-audit services

2.9

2.2

Total

4.3

3.6

Statutory audit of the Company and Group Financial Statements The audit of the Financial Statements of Group companies pursuant to legislation:

Included in total other services for 2016 are £0.6m of costs in relation to the acquisition of PP&T (see note 40). The fee for the statutory audit of the Company's annual Financial Statements was £0.1m (2015: £0.1m). £nil of other services were provided to the Company by the Group's auditor (2015: £0.4m).

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

2016 £m

FINANCIAL STATEMENTS

Group

142

Notes to the Financial Statements continued For the year ended 31 March 2016

6 Employee benefit costs Monthly average

Year end

2016 Number

2015 Number

2016 Number

2015 Number

UK and Europe

9,116

9,064

9,014

9,286

North America

2,750

2,792

2,741

2,731

Middle East

2,412

2,039

2,349

2,168

Asia Pacific

1,291

1,381

1,214

1,352

Energy

1,759

1,550

1,761

1,723

85

81

93

80

17,413

16,907

17,172

17,340

Number of full time equivalent people (including executive directors, but excluding agency staff) employed by the Group By segment:

Corporate Total for Group

Aggregate employee benefit costs of those people amounted to: Group Note Wages and salaries, including restructuring costs Social security costs Pension curtailment gain Defined benefit current service cost

2016 £m

2015 £m

965.7

819.4

69.5

64.2

(1.5)

–

30

2.6

2.2 39.8

Charge for defined contribution schemes

30

43.3

Other post-employment benefit costs

30

4.2

3.9

Share-based payments

33

11.5

11.3

1,095.3

940.8

Wages and salaries include £7.5m of restructuring costs (2015: £3.5m) 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 39.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

143

Note

2016 £m 3.2

3.3

29

0.1

0.1

Interest payable on borrowings Unwinding of discount on vacant property

2015 £m

Unwind of discount on contingent and deferred consideration

20

0.4

0.1

Net finance costs on net post-employment benefit liabilities

30

10.6

14.3

Other finance costs

0.7

1.5

Finance costs

15.0

19.3

Interest receivable on short term deposits

(0.8)

(1.1)

Interest income on financial assets at fair value through profit or loss

(0.3)

(0.6)

Unwinding of discount

(0.3)

–

Interest receivable on loan notes

(2.4)

(2.5)

Other finance income

(0.2)

(0.6)

Finance income

(4.0)

(4.8)

Net finance costs

11.0

14.5

Company net finance costs were £1.1m (2015: £1.3m).

GOVERNANCE

Group

STRATEGIC REPORT

7 Net finance costs

8 Income tax expense a) Analysis of charge in the year Group 2016 £m

2015 £m

33.2

28.1

(6.3)

(0.3)

– origination and reversal of temporary differences

(1.1)

(6.5)

– effect of changes in tax rates

1.9

(0.3)

27.7

21.0

Note – current tax on profits for the year – adjustment in respect of prior years Deferred income tax

Income tax charged to Consolidated Income Statement

19

Adjust for: – taxation on net profit on disposal of businesses

–

(0.1)

– taxation on exceptional items

–

0.5

– taxation on amortisation of acquired intangibles

2.4

2.5

– taxation on deferred acquisition payments

1.2

0.6

31.3

24.5

131.1

106.7

Underlying income tax expense Profit before tax per Consolidated Income Statement

FINANCIAL STATEMENTS

Current income tax

– net loss/(profit) on disposal of businesses

3.1

(0.4)

– exceptional items

(4.7)

4.4

–

2.8

– amortisation and impairment of acquired intangibles

6.3

6.9

– deferred acquisition payments

3.2

1.5

139.0

121.9

– impairment of goodwill

Underlying profit before income tax Effective income tax rate

21.1%

19.7%

Underlying effective income tax rate

22.5%

20.1%

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Adjust for:

144

Notes to the Financial Statements continued For the year ended 31 March 2016

8 Income tax expense continued b) Factors affecting income tax rate The income tax rate for the year is higher (2015: lower) than the standard rate of corporation tax in the UK of 20% (2015: 21%). The differences are explained below: Group 2016 %

2015 %

20.0

21.0

Expenses not deductible for tax purposes

0.8

0.8

Adjustment in respect of overseas tax rates

3.2

2.6

UK statutory income tax rate Increase/(decrease) resulting from:

Effect of share-based payments

0.2

0.7

Research and development tax credits

(3.5)

(1.1)

Losses not previously recognised for tax

(1.3)

(4.2)

Effect of change in tax rates

1.4

(0.3)

Other Effective income tax rate

0.3

0.2

21.1

19.7

The underlying income tax rate for the year is higher (2015: lower) than the standard rate of corporation tax in the UK of 20% (2015: 21%). The differences are explained below: Group 2016 %

2015 %

20.0

21.0

Expenses not deductible for tax purposes

0.9

0.3

Adjustment in respect of overseas tax rates

4.3

3.0

Effect of share-based payments

0.1

0.6

Research and development tax credits

(3.3)

(1.0)

Losses not previously recognised for tax

(1.2)

(3.7)

Effect of change in tax rates

1.4

(0.2)

Other

0.3

0.1

22.5

20.1

UK statutory income tax rate Increase/(decrease) resulting from:

Underlying effective income tax rate

The rate of corporation tax in the UK as at 31 March 2016 was 20%. Legislation to reduce the rate of corporation tax to 19% from 1 April 2017 and 18% from 1 April 2020 was substantively enacted on 26 October 2015. A further reduction in the UK corporation tax rate to 17% from 1 April 2020 (rather than the 18% previously announced) was announced in the March 2016 Budget, however as this was not substantively enacted at the balance sheet date, the impact is not reflected in the figures above.

WS Atkins plc Annual Report 2016

145

c) Income tax on components of other comprehensive income The tax (charge)/credit relating to components of other comprehensive income is as follows: Group Postemployment benefit liability £m

Cash flow hedges £m

At 1 April

54.4

–

54.4

Deferred income tax

(10.5)

–

(10.5)

4.8

0.3

5.1

48.7

0.3

49.0

Postemployment benefit liability £m

Cash flow hedges £m

Total £m

At 1 April

55.9

0.9

56.8

Deferred income tax

(5.5)

–

(5.5)

Current income tax

4.0

(0.9)

3.1

54.4

–

54.4

2016

Current income tax At 31 March

Total £m

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

FINANCIAL STATEMENTS

At 31 March

INVESTOR INFORMATION

2015

GOVERNANCE

Group

WS Atkins plc Annual Report 2016

146

Notes to the Financial Statements continued For the year ended 31 March 2016

9 Net (loss)/profit on disposal of businesses Group

2016 £m

2015 £m

(Loss)/profit on disposal of businesses WS Atkins – (Portugal) CEPI Limitada WS Atkins – Polska Sp. z o.o. UK highways services Net (loss)/profit on disposal

(3.1)

–

–

(0.1)

–

0.5

(3.1)

0.4

WS Atkins – (Portugal) CEPI Limitada In July 2015, the Group announced the completion of its disposal of WS Atkins (Portugal) CEPI Limitada to an international investment fund. All staff and assets transferred on 24 June 2015. While the assets and liabilities of the Portuguese business represent a disposal group, the business has not been reported as a discontinued operation at 31 March 2016 as it did not represent a major line of business. The Portuguese business was reported within the UK and Europe operating segment (note 3) prior to its disposal. The loss on disposal at 24 June 2015 was as follows: 2016 £m Net consideration received or receivable at date of disposal Initial cash consideration

–

Disposal consideration

–

Assets and liabilities at date of disposal Deferred income tax assets

0.1

Cash and cash equivalents

2.4

Trade and other receivables

0.5

Trade and other payables

(0.3)

Net assets

2.7

Loss on disposal before costs

(2.7)

Disposal costs incurred

(0.4)

Loss on disposal

(3.1)

WS Atkins – Polska Sp. z o.o. On 11 September 2014 the disposal of the Group's Polish business, WS Atkins - Polska Sp. z o.o., to Multiconsult AS was completed. The business was sold for a net cash consideration of €3.5m (£2.8m). While the assets and liabilities of the Polish business represent a disposal group, the business has not been reported as a discontinued operation at 31 March 2015 as it did not represent a major line of business. The Polish business was reported within the UK and Europe operating segment (note 3) prior to its disposal. UK highways services On 27 February 2013 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. While the profit on disposal of this business was included in the Consolidated Income Statement for the year ended 31 March 2014, during the year ended 31 March 2015, a portion of the available deferred consideration was received, totalling £0.5m. This resulted in a £0.5m profit on disposal being recognised in the year ended 31 March 2015.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

147

Terramar has unique project management skills and a well-established client base in both the public and private sector in Norway.

STRATEGIC REPORT

10 Business combinations Terramar AS (Terramar) On 17 November 2014 the Company acquired the entire share capital of Terramar, one of Norway's leading project management consultancies, for a cash consideration of NOK135.1m (£12.8m). Terramar has been involved in the planning and implementation of some of Norway's most high profile projects. The company has 65 employees providing project management services across infrastructure, health, urban development and communications.

The acquisition raised our skills in project management and our presence in Norway, bringing the capacity, skills and knowledge to enable us to bid for major projects.

Houston Offshore Engineering, LLC (HOE) On 1 October 2014 the Group acquired the entire share capital of HOE, a leading oil and gas offshore engineering business based in Houston, Texas, USA. HOE employs a team of 150 specialists with vast experience in the design of offshore deep water floating production platforms. The company also brings to the Group a well-established project and client base in the international oil and gas market. HOE's key disciplines include platform structures and systems, naval architecture and marine engineering, power, electrical and instrumentation engineering, piping and topsides engineering. The company works through all stages of the project design and construction lifecycle, from concept through front end engineering design and detailed engineering, project delivery, procurement and construction support, transport and installation.

GOVERNANCE

At 31 March 2015, the fair value of acquired assets, liabilities and goodwill for this business combination were 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 position has now been finalised and has not changed from the position reported at 31 March 2015.

In addition to the initial consideration paid, US$14.6m (£9.0m) cash was paid into escrow and will be paid out to the vendors if they remain employed by the Group for the three years following the acquisition. This amount is being amortised over the retention period as a post-acquisition employment expense. During the year ended 31 March 2016, £3.2m (31 March 2015: £1.5m) was charged to administrative expenses in the Consolidated Income Statement. Nuclear Safety Associates, Inc (NSA) On 4 September 2014 the Group acquired the entire share capital of Nuclear Safety Associates, Inc (NSA), a 130 people engineering and technical services firm, for a debt-free cash consideration of US$14.0m (approximately £8.5m) with a further US$1m (approximately £0.6m) deferred for two years.

FINANCIAL STATEMENTS

At 31 March 2015, the fair value of acquired assets, liabilities and goodwill for this business combination were 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 position has now been finalised and has not changed from the position reported at 31 March 2015.

In addition, contingent consideration is payable in cash to the former owners of NSA based on revenue and operating profit targets for the first three years from acquisition, followed by operating margin growth levels for the next two years. The Group prepares detailed forecasts on the acquisition of a business and updates these on a quarterly basis as part of its normal operating processes. These forecasts use management's evaluation of the revenue, costs and expected margins, based on past experience. Refer to note 20 for further detail.

The acquisition enhances the Group's presence in North America, the world's largest nuclear market, and its safety and security skills will strengthen the Group's international nuclear offering. At 30 September 2014 and 31 March 2015, the fair value of acquired assets, liabilities and goodwill for this business combination were 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 position has now been finalised and has not changed from the position reported at 31 March 2015.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

NSA brings expertise in nuclear safety, design engineering and professional security services and has a well-established project and client base in the US nuclear market. 


148

Notes to the Financial Statements continued For the year ended 31 March 2016

11 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 amounts presented as exceptional items in these Financial Statements is given below: Group 2016 £m

2015 £m

Profit on disposal of property

6.5

–

External fees in relation to acquisition of PP&T

(3.3)

–

1.5

–

–

(4.4)

4.7

(4.4)

Curtailment gain relating to one-off pension events External fees in relation to unsuccessful acquisition pursuit

The exceptional items above are included within administrative expenses in the Group's Consolidated Income Statement. The sale of part of the Group’s Woodcote Grove property in Epsom completed on 30 September 2015 and resulted in a pre and post-tax profit on disposal of £6.5m being recognised at 31 March 2016. There was no tax on the profit on disposal as the taxable gain will be reduced to nil by indexation allowance. In November 2015, the Group signed an agreement to acquire PP&T, an international nuclear engineering services business headquartered in North America. The transaction completed on 11 April 2016. Consistent with the Group's treatment of such costs on similar scale acquistions in prior periods, the external fees to 31 March 2016 of £3.3m in relation to the acquisition have been classified as an exceptional item. Further details of the transaction are set out in note 40. For details of the pension curtailment gain, refer to note 30.

12 Dividends Company and Group

Final dividend paid for the year ended 31 March 2015 (2014)

2016 pence

2015 pence

2016 £m

2015 £m

25.50

23.25

24.8

22.7

Interim dividend paid for the year ended 31 March 2016 (2015)

11.70

11.00

11.4

10.7

Dividends recognised in the year

37.20

34.25

36.2

33.4

Interim dividend paid for the year ended 31 March 2016 (2015)

11.70

11.00

11.4

10.7

Final dividend proposed for the year ended 31 March 2016 (2015)

27.80

25.50

27.0

24.8

Dividends relating to the year

39.50

36.50

38.4

35.5

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. As at 31 March 2016 one Employee Benefit Trust (EBT) had an agreement in place to waive dividends in excess of 0.01 pence per share on 213,461 ordinary shares (2015: 213,461). A separate Employee Benefit Trust also had an agreement in place as at 31 March 2016 to waive future dividends in their entirety on 2,606,304 ordinary shares (2015: 2,730,695). These arrangements reduced the dividends paid in year by £1.0m (2015: £0.8m). As at 31 March 2016, 4,341,000 ordinary shares (2015: 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 £1.6m (2015: £1.5m).

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

149

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 to 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 and awards outstanding during the year. The options and awards relate to discretionary employee share plans. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

STRATEGIC REPORT

13 Earnings per share (EPS)

Group 2016 Number (000)

2015 Number (000)

97,366

97,573

2,796

2,785

100,162

100,358

£m

£m

103.2

85.7

(4.7)

3.9

Weighted average number of shares used in diluted and underlying diluted EPS Note Earnings Profit for the year attributable to owners of the parent Exceptional items (net of tax)

11

Goodwill impairment (net of tax) Amortisation of acquired intangibles (net of tax) Deferred acquisition payments (net of tax) Net loss/(profit) on disposal of businesses (net of tax)

9

Underlying earnings

–

2.8

3.9

4.4

2.0

0.9

3.1

(0.3)

107.5

97.4

pence

pence

Basic earnings per share

106.0

87.8

Diluted earnings per share

103.0

85.4

Underlying basic earnings per share

110.4

99.8

Underlying diluted earnings per share

107.3

97.1

14 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 2006. The profit and total comprehensive income for the year attributable to the owners of the parent was £54.9m (2015: £34.7m), which included £56.2m (2015: £40.9m) of dividend income from subsidiary companies.

FINANCIAL STATEMENTS

Weighted average number of shares used in basic and underlying basic EPS Effect of dilutive securities – share options

GOVERNANCE

Number of shares

INVESTOR INFORMATION

The Company's individual Income Statement and Statement of Comprehensive Income were approved by the Board on 15 June 2016.

WS Atkins plc Annual Report 2016

150

Notes to the Financial Statements continued For the year ended 31 March 2016

15 Goodwill Group Note Cost at 1 April Additions Difference on exchange Cost at 31 March Aggregate impairment at 1 April Impairment charge for the year Difference on exchange Aggregate impairment at 31 March Net book value at 31 March

10

2016 £m

2015 £m

255.9

212.1

–

30.5

9.4

13.3

265.3

255.9

11.5

8.1

–

2.8

0.6

0.6

12.1

11.5

253.2

244.4

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. The following is a summary of goodwill allocation by CGU or group of CGUs, summarised at the operating segment level: Group 2016 £m

2015 £m

UK and Europe

49.7

49.2

North America

151.5

144.7

Asia Pacific Energy Total

5.9

5.6

46.1

44.9

253.2

244.4

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. Cash generating units Following the reorganisation and rationalisation of our UK operations into four market facing divisions, which took effect on 1 April 2015, the CGUs for the purpose of testing goodwill allocated to the UK and Europe operating segment have changed. Following IAS 36 requirements, this reorganisation required a reallocation of goodwill previously allocated to the CGUs of the former reporting structure. There was no change to the goodwill allocation at the operating segment level.

WS Atkins plc Annual Report 2016

151

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.

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

The cash flow projections from that budget are extrapolated for the next four years using an estimated growth rate and projected margin for all CGUs, or groups of CGUs, except for the North America operating segment and the oil and gas business of the Energy operating segment. The Group's formal five year plan is used for these parts of the business as it provides a better indication of their future performance. The growth rates used to extrapolate the budgets are between 1.9% to 3.0% and are based on the economic environment for the country or region 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 or region in which the CGU operates of between 1.8% and 3.2%. The 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 or the Group's formal five year plan margin expectations. The projections do not include the impact of future restructuring projects to which the Group is not yet committed.

GOVERNANCE

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 or the Group's formal five year plan.

The cash flows have been discounted using the CGU's specific pre-tax discount rates of between 8.9% and 13.1%. The discount rates have been calculated using the capital asset pricing model to determine the cost of equity and are adjusted for risks specific to the CGU. The discount rates are revised annually using updated market information.

2015

Five year growth rate

1.9% – 3.0%

1.9% – 3.8%

Post five year growth rate

1.8% – 3.2%

1.8% – 3.8%

8.9% – 13.1%

8.9% – 16.0%

Pre-tax discount rate

Prior period impairment loss Following the downturn in the European aerospace market, the carrying amount of goodwill arising on the acquisition in 2007 of the Dutch consultancy Nedtech Engineering BV was reviewed during the prior year ended 31 March 2015 and, as a consequence, reduced to its recoverable amount through the recognition of an impairment loss of £2.8m. This loss was included in administrative expenses in the Consolidated Income Statement for the period ended 31 March 2015. Following the reorganisation and rationalisation of our UK operations, there was a reallocation of goodwill previously allocated to the CGUs of the former reporting structure, including the goodwill arising on the acquisition of Nedtech Engineering BV. Following these changes, sensitivity analysis has indicated that there is no longer a significant risk of the carrying amount of the CGU, to which this goodwill has been allocated, exceeding its recoverable amount.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Group 2016

FINANCIAL STATEMENTS

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

152

Notes to the Financial Statements continued For the year ended 31 March 2016

15 Goodwill continued Sensitivity analysis North America group of CGUs Goodwill of £151.5m (2015: £144.7m) allocated to the North America operating segment includes £143.5m 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, key inputs to which are the Group's 2016/17 budget and the formal five year plan for the North America segment, which covers the period to 2020. The other assumptions used for this value in use calculation are the long term growth rate and the discount rate as follows: 2016 Post five year growth rate Pre-tax discount rate

2015

2.0%

2.0%

12.2%

14.0%

Given the materiality of goodwill allocated to the North America group of CGUs, sensitivity analysis has been performed on the key assumptions used in the value in use calculations. The recoverable amount of the North America group of CGUs calculated based on value in use exceeds its carrying value by £161.6m. The two assumptions to which these value in use calculations are most sensitive are the projected profit margin as extracted from the five year plan and the discount rate applied. Specific sensitivity analysis with regard to these assumptions shows that, with respect to the profit margin it would need to fall by 350 basis points before any impairment would be triggered, and similarly the pre-tax discount rate would need to increase from 12.2% to 18.4%. Oil and gas group of CGUs Market conditions in the oil and gas sector and the performance of our oil and gas business, as reported in the Energy Segmental performance, led to a closer review of the carrying value of goodwill in the oil and gas CGU. We have included additional information for the oil and gas CGU. The recoverable amount of the oil and gas CGU exceeds the carrying amount of the group of CGUs at 31 March 2016 by £22.3m (2015: £74.1m). The recoverable amount of this group of CGUs has been determined using an internal value in use calculation, key inputs to which are the Group's 2016/17 budget and the formal five year plan for the oil and gas business, which covers the period to 2020. The other assumptions used for this value in use calculation are the long term growth rate and the discount rate as follows: 2016 Post five year growth rate Pre-tax discount rate

2015

1.8%

1.9%

10.7%

10.5%

Sensitivity analysis has been performed on the key assumptions used in the value in use calculations. The two assumptions to which these value in use calculations are most sensitive are 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 190 basis points before any impairment would be triggered, and similarly the pre-tax discount rate would need to increase from 10.7% to 13.3%. For the CGUs other than those disclosed above, 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 change in any individual key assumption would cause the carrying amount of any CGU to exceed its recoverable amount. As at 31 March 2016 and 2015, based on these valuations, the recoverable value of the remaining goodwill required no impairment.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

153

Cost at 1 April 2014 Additions Acquisition of subsidiary undertakings

10

Trade names and trademarks £m

Software licences £m

Total £m

40.8

0.2

1.2

26.4

68.6

–

–

1.0

4.4

5.4

16.3

–

6.4

0.1

22.8

Disposals

–

–

–

(2.0)

(2.0)

Divestment of subsidiary undertakings

–

–

–

(0.1)

(0.1)

Difference on exchange

5.1

–

0.6

0.5

6.2

Cost at 31 March 2015

62.2

0.2

9.2

29.3

100.9

–

–

–

3.0

3.0

Additions Disposals

–

–

–

(4.7)

(4.7)

Divestment of subsidiary undertakings

–

–

–

(0.1)

(0.1)

Difference on exchange

2.7

–

(0.3)

0.4

2.8

Cost at 31 March 2016

64.9

0.2

8.9

27.9

101.9

15.1

0.2

1.2

16.7

33.2

6.2

–

0.8

6.0

13.0

Accumulated amortisation and impairment at 1 April 2014 Amortisation charge for the year

5

Disposals

–

–

–

(1.9)

(1.9)

Divestment of subsidiary undertakings

–

–

–

(0.1)

(0.1)

1.9

–

0.1

0.4

2.4

23.2

0.2

2.1

21.1

46.6

Difference on exchange Accumulated amortisation and impairment at 31 March 2015 Amortisation charge for the year

4.8

–

1.7

5.4

11.9

Disposals

–

–

–

(4.5)

(4.5)

Divestment of subsidiary undertakings

–

–

–

(0.1)

(0.1)

1

Difference on exchange

1

Corporate information systems £m

5

0.7

–

0.1

0.4

1.2

Accumulated amortisation and impairment at 31 March 2016

28.7

0.2

3.9

22.3

55.1

Net book value at 31 March 2016

36.2

–

5.0

5.6

46.8

Net book value at 31 March 2015

39.0

–

7.1

8.2

54.3

GOVERNANCE

Note

Acquired customer relationships £m

FINANCIAL STATEMENTS

Group

STRATEGIC REPORT

16 Other intangible assets

Included in the amortisation of trade names and trademarks for 31 March 2016 is £1.5m in respect of acquired intangibles.

Included within acquired customer relationships are costs of £4.9m (2015: £4.9m) in respect of backlog orders, arising from the acquisition of PBSJ on 1 October 2010. At 31 March 2016, the net book value of these backlog orders is £nil (2015: £nil) and they are fully amortised.

Included within acquired customer relationships are costs of £1.2m (2015: £1.2m) in respect of backlog orders, arising from the acquisition of NSA on 4 September 2014. At 31 March 2016, the net book value of these backlog orders is £nil (2015: £0.2m) and they are fully amortised. Included within acquired customer relationships are costs of £4.1m (2015: £4.1m) in respect of backlog orders, arising from the acquisition of HOE on 1 October 2014. At 31 March 2016, the net book value of these backlog orders is £nil (2015: £1.5m) and they are fully amortised. The amortisation charge for the year of £11.9m (2015: £13.0m) is included in administrative expenses in the Consolidated Income Statement.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

The remaining amortisation life of the other assets included within acquired customer relationships is 13.5 years.

154

Notes to the Financial Statements continued For the year ended 31 March 2016

17 Property, plant and equipment Group

Note Cost at 1 April 2014 Additions Acquisition of subsidiary undertakings

10

Disposals Divestment of subsidiary undertakings

Freehold land and buildings £m

Short term Plant, leasehold machinery and property vehicles £m £m

Total £m

20.4

29.6

70.8

120.8

0.1

4.0

15.8

19.9

–

0.8

1.1

1.9

–

(1.4)

(7.1)

(8.5)

–

–

(0.3)

(0.3)

Difference on exchange

1.0

1.3

3.1

5.4

Cost at 31 March 2015

21.5

34.3

83.4

139.2

–

4.0

12.9

16.9

(3.1)

(17.1)

(28.0)

–

(0.4)

(0.4)

Additions Disposals

(7.8)

Divestment of subsidiary undertakings

–

Difference on exchange

0.6

0.8

2.2

3.6

Cost at 31 March 2016

14.3

36.0

81.0

131.3

8.5

21.3

44.3

74.1

0.5

3.3

12.5

16.3

Disposals

–

(1.3)

(7.1)

(8.4)

Divestment of subsidiary undertakings

–

(0.2)

(0.2)

Accumulated depreciation at 1 April 2014 Depreciation charge for the year

5

–

Difference on exchange

0.1

0.9

2.8

3.8

Accumulated depreciation at 31 March 2015

9.1

24.2

52.3

85.6

Depreciation charge for the year Disposals Divestment of subsidiary undertakings

5

0.4

3.5

14.3

18.2

(6.3)

(3.1)

(17.0)

(26.4)

–

–

(0.4)

(0.4)

Difference on exchange

0.2

0.4

1.8

2.4

Accumulated depreciation at 31 March 2016

3.4

25.0

51.0

79.4

Net book value at 31 March 2016

10.9

11.0

30.0

51.9

Net book value at 31 March 2015

12.4

10.1

31.1

53.6

The depreciation charge for the year of £18.2m (2015: £16.3m) 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 2016. The market value of freehold land and buildings is estimated at £12.5m (2015: £20.1m). Included in plant, machinery and vehicles above are equipment and vehicles held under finance leases and hire purchase contracts as follows: 2016 £m

2015 £m

Cost

0.2

0.2

Accumulated depreciation

(0.1)

(0.2)

Net book value

0.1

–

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

155

Company Total £m Cost at 1 April 2014

201.8

Additions

8.6

Cost at 31 March 2015

210.4

Additions

9.4

Disposals

(0.4)

Cost at 31 March 2016

STRATEGIC REPORT

18 Investments in subsidiaries

219.4 0.8

Impairment charge for the year

2.9

Impairment at 31 March 2015

3.7

Disposals

(0.4)

Impairment at 31 March 2016

3.3

Net book value at 31 March 2016

216.1

Net book value at 31 March 2015

206.7

GOVERNANCE

Impairment at 1 April 2014

The Group's subsidiaries are disclosed in note 41.

19 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:

2016 £m

2015 £m

62.7

75.7

Deferred tax assets: – deferred tax assets to be recovered after more than 12 months – deferred tax assets to be recovered within 12 months

3.8

1.1

66.5

76.8

(6.9)

(7.0)

Deferred tax liabilities: – deferred tax liabilities to be settled after more than 12 months – deferred tax liabilities to be settled within 12 months Deferred tax assets (net)

(4.8)

(3.1)

(11.7)

(10.1)

54.8

66.7

FINANCIAL STATEMENTS

Group

INVESTOR INFORMATION

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.

WS Atkins plc Annual Report 2016

156

Notes to the Financial Statements continued For the year ended 31 March 2016

19 Deferred income tax continued a) Net deferred tax assets/(liabilities) Group

Accelerated depreciation

2016 £m

2015 £m

6.4

7.8

Share-based payments

3.6

4.2

Goodwill

(2.6)

(3.6)

Deferred tax asset on post-employment benefit liabilities

49.3

60.6

Deferred income

(14.2)

(12.2)

Amortisation of acquired intangibles

(8.6)

(10.1)

Employee benefits

11.3

9.8

Other temporary differences Total deferred income tax

9.6

10.2

54.8

66.7

b) Analysis of movements during the year Group Note Deferred tax assets at 1 April Deferred tax (charged)/credited to the Consolidated Income Statement

8

Deferred tax on disposals Deferred tax on acquisitions Deferred tax charged to equity Foreign exchange difference on deferred tax Deferred tax assets at 31 March

10

2016 £m

2015 £m

66.7

67.2

(0.8)

6.8

–

(0.7)

– (11.0) (0.1)

0.1

54.8

66.7

The Finance Act 2015 enacted a reduction to the rate of UK corporation tax to 19% from 1 April 2017 and 18% from 1 April 2020. As Finance Act 2015 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 2016. A further reduction in the UK corporation tax rate to 17% from 1 April 2020 (rather than the 18% previously announced) was announced in the March 2016 Budget but not substantively enacted at the balance sheet date.

WS Atkins plc Annual Report 2016

(0.6) (6.1)

Financial Statements > Notes to the Financial Statements

157

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.

STRATEGIC REPORT

20 Financial risk management

These policies are further described within the 'Treasury policies and objectives' section (note 2).

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

GOVERNANCE

Where individual sensitivities are disclosed below, all other variables are held constant.

• changes in the carrying value of other financial instruments not in hedging relationships only affect the Consolidated Income Statement.

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

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.

At 31 March 2016, if sterling had strengthened 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 (2015: £0.4m) and equity would have been £0.4m higher (2015: £0.4m). If sterling had weakened by a reasonably possible change of 10% against the US dollar, post-tax profit for the year would have been lower by approximately £0.5m (2015: £0.5m) and equity would have been £0.5m lower (2015: £0.5m). At 31 March 2016, 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 £0.6m (2015: £0.4m) and equity would have been £0.6m lower (2015: £0.4m). 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 (2015: £0.5m) and equity would have been £0.8m higher (2015: £0.5m). 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.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

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.

158

Notes to the Financial Statements continued For the year ended 31 March 2016

20 Financial risk management continued Financial risk factors continued a) Market risk 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 2016 had been 10 basis points higher/lower, post-tax profit for the year would have been approximately £0.2m (2015: £0.2m) 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. 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. There is no recent history of default.

WS Atkins plc Annual Report 2016

159

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 27) 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.

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

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.

Finance leases Bank loans1 Private placement debt1 Trade payables

On demand or within 1 year £m

Between 1 and 2 years £m

–

0.1

Between 2 and 5 years £m –

10.0

3.1

225.3

2.5

2.5

56.0

75.1

Over 5 years £m

Total £m

–

0.1

–

238.4

–

61.0

–

–

75.1

Between 2 and 5 years £m

Over 5 years £m

Total £m

–

GOVERNANCE

Group 2016

On demand or within 1 year £m

Private placement debt1 Trade payables

0.1

–

–

–

0.1

61.1

–

–

–

61.1

2.5

2.5

5.3

50.2

60.5

66.3

–

–

–

66.3

INVESTOR INFORMATION

Finance leases Bank loans1

Between 1 and 2 years £m

FINANCIAL STATEMENTS

2015

WS Atkins plc Annual Report 2016

160

Notes to the Financial Statements continued For the year ended 31 March 2016

20 Financial risk management continued Financial risk factors continued c) Liquidity risk conintuned Company 2016 On demand or within 1 year £m

Between 1 and 2 years £m

Between 2 and 5 years £m

Over 5 years £m

Total £m

10.0

3.1

225.3

–

238.4

Private placement debt1

2.5

2.5

56.0

–

61.0

Intercompany payables

51.9

–

–

–

51.9

Bank loans1

2015 On demand or within 1 year £m

Between 1 and 2 years £m

Between 2 and 5 years £m

Over 5 years £m

Total £m

61.1

–

–

–

61.1

Private placement debt

2.5

2.5

5.3

50.2

60.5

Intercompany payables

65.9

–

–

–

65.9

Bank loans1 1

1

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.

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: 2016

2015

Financial assets £m

Financial liabilities £m

Financial assets £m

Financial liabilities £m

Sterling

269.5

322.6

302.9

157.5

US dollar

333.3

18.8

127.3

7.3

38.6

8.1

39.5

6.5

Qatari riyal

27.1

2.9

28.3

2.3

HK dollar

16.2

–

19.6

0.2

Euro

15.7

1.1

14.5

1.3

China RMB

0.4

UAE dirham

10.9

0.2

19.4

Danish krone

8.3

0.7

6.5

0.2

Saudi Arabian riyal

8.4

0.4

12.6

0.6

Singapore dollar

6.0

0.4

2.8

–

Australian dollar

4.3

0.1

6.0

0.9

Swedish krona

3.7

0.4

2.7

0.4

Trinidad & Tobago dollar

3.4

–

1.4

–

Malaysian ringgit

1.4

–

0.1

–

Other

18.8

–

17.2

–

Total

765.6

355.7

600.8

177.6

As at 31 March 2016, the carrying value of the financial assets of the Company are denominated in US dollars (£281.6m) and sterling (£59.0m). The carrying value of the financial liabilities of the Company are denominated in US dollars (£280.5m) and sterling (£51.9m).

WS Atkins plc Annual Report 2016

161

At 31 March 2015, the carrying value of the financial assets of the Company were denominated in US dollars (£115.1m) and sterling (£54.3m). The carrying value of the financial liabilities of the Company were denominated in US dollars (£111.2m) and sterling (£68.5m). Financial assets consist of loan notes; trade receivables (net); intercompany receivables (nil in Consolidated Financial Statements); 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 Financial Statements); 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.

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

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 underlying earnings before interest, taxes, depreciation, amortisation and impairment (EBITDA). This policy is unchanged from the prior year.

Note

2015 £m

Total borrowings

27

280.6

111.3

Less: cash and cash equivalents

26

Net cash and cash equivalents

(419.3)

(235.4)

(138.7)

(124.1)

Net defined benefit pension deficit

30

265.3

298.4

Net deferred tax asset

19

(54.8)

(66.7)

71.8

107.6

142.1

121.2

Net debt plus net defined pension deficit net of total deferred tax Profit before interest and tax Add: depreciation

5

18.2

16.3

Add: amortisation and impairment

5

11.9

15.8

172.2

153.3

3.1

(0.4)

EBITDA Add: net loss/(profit) on disposal of businesses Less: exceptional items

11

(4.7)

4.4

Add: deferred acquisition payments

10

3.2

1.5

173.8

158.8

0.4

0.7

Underlying EBITDA Ratios of net debt plus net defined benefit pension deficit net of total deferred tax to underlying EBITDA

FINANCIAL STATEMENTS

Group 2016 £m

GOVERNANCE

The ratios of net debt plus net defined benefit pension deficit net of total deferred tax to underlying EBITDA as at 31 March 2016 and 2015 were as follows:

Total capital, as shown below, is calculated as 'equity' as shown in the Consolidated Balance Sheet less net funds. Net funds is calculated as total borrowings less cash and cash equivalents:

Note

2015 £m

Total borrowings

27

280.6

111.3

Less: cash and cash equivalents

26

(419.3)

(235.4)

Net funds

(138.7)

(124.1)

Total equity

289.3

205.0

Total capital

150.6

80.9

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Group 2016 £m

162

Notes to the Financial Statements continued For the year ended 31 March 2016

20 Financial risk management continued Financial risk factors continued d) Concentrations of financial instruments continued 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) • inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The following table presents the Group's assets and liabilities that are measured at fair value at 31 March 2016 and 2015. 2016

2015

Level 1 £m

Level 2 £m

Level 3 £m

Total £m

Level 1 £m

Level 2 £m

Level 3 £m

Total £m

–

3.3

–

3.3

–

2.5

–

2.5

24.2

–

–

24.2

20.9

–

–

20.9

–

2.9

–

2.9

–

3.1

–

3.1

5.8

–

–

5.8

5.5

–

–

5.5

–

–

–

–

3.9

–

–

3.9

30.0

6.2

–

36.2

30.3

5.6

–

35.9

–

1.5

–

1.5

–

0.8

–

0.8

– Contingent consideration

–

–

1.9

1.9

–

–

2.8

2.8

Total liabilities

–

1.5

1.9

3.4

–

0.8

2.8

3.6

Assets Derivatives used for hedging – Foreign exchange contracts Financial assets at fair value through profit or loss Marketable securities – Fixed interest securities – Life insurance policies – Floating rate notes – UK treasury bills Total assets Liabilities Derivatives used for hedging – Foreign exchange contracts Financial liabilities at fair value through profit or loss

There have been no changes to the classification of the Group's financial instruments carried at fair value between Level 1, Level 2 and Level 3 at 31 March 2016 or 2015. 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 life insurance policies is determined using the market value of underlying investments as advised by fund actuaries. 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.

WS Atkins plc Annual Report 2016

163

Level 3 financial instruments The fair value of financial instruments for an asset or liability that are not based on observable market data (that is, unobservable inputs) are Level 3 financial instruments. Level 3 valuation technique and significant unobservable inputs The main Level 3 inputs used by the Group in estimating the contingent consideration payment are based on revenue and operating profit targets for the first three years from acquisition, followed by operating margin growth levels for the next two years. The Group prepares detailed forecasts on the acquisition of a business and updates these on a quarterly basis as part of its normal operating processes. These forecasts use management’s evaluation of the revenue, costs and expected margins, based on past experience. The fair value of the contingent consideration arrangement of £1.9m (2015: £2.8m) was calculated at the year end by estimating probable future cash flows payable and discounting these at a discount rate of 7.9% (2015: 9.3%).

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

Level 3 inter-relationship between significant unobservable inputs and fair value measurement The estimated fair value of the Level 3 financial instrument would increase if there was a change in either the annual revenue, annual operating profit or the risk-adjusted discount rate.

Group Note

2016 £m

2015 £m

10

2.8

2.5

7

0.2

0.1

0.1

–

(1.4)

–

Net difference on exchange

0.2

0.2

Balance at 31 March

1.9

2.8

Assumed in a business combination

GOVERNANCE

Level 3 sensitivity analysis A reasonable possible change to annual revenue and annual operating profit of 5% and a change of 100bps to the discount rate, holding other inputs constant, would not result in a significant change in the fair value.

Loss included in net finance costs Unwind of discount on contingent consideration Change in discount rate Gain included in administration costs Change in profit assumptions

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, Barclays 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

FINANCIAL STATEMENTS

Loss included in other comprehensive income

INVESTOR INFORMATION

• the fair value of all life insurance policies are provided by the Group's insurance companies.

WS Atkins plc Annual Report 2016

164

Notes to the Financial Statements continued For the year ended 31 March 2016

20 Financial risk management continued Financial risk factors continued d) Concentrations of financial instruments continued Offsetting financial assets and financial liabilities As at 31 March 2016 Related amounts not set off in Balance Sheet – Financial instruments £m

Gross amounts of recognised financial assets/ (liabilities) £m

Gross amounts of recognised financial assets/(liabilities) set off the Balance Sheet £m

Net amounts of financial assets/(liabilities) presented in the Balance Sheet £m

Derivative financial assets

3.3

–

3.3

(0.9)

2.4

Derivative financial liabilities

(1.5)

–

(1.5)

0.9

(0.6)

430.6

(11.3)

419.3

–

419.3

(11.3)

Cash and cash equivalents Credit balance

Net amount £m

11.3

–

–

–

421.1

–

421.1

–

421.1

Gross amounts of recognised financial assets/ (liabilities) £m

Gross amounts of recognised financial assets/(liabilities) set off the Balance Sheet £m

Net amounts of financial assets/(liabilities) presented in the Balance Sheet £m

Related amounts not set off in Balance Sheet – Financial instruments £m

Net amount £m

Derivative financial assets

2.5

–

2.5

(0.6)

1.9

Derivative financial liabilities

(0.8)

–

(0.8)

0.6

(0.2)

265.1

(29.7)

235.4

Credit balance

(29.7)

29.7

–

–

–

Total

237.1

–

237.1

–

237.1

Total

As at 31 March 2015

Cash and cash equivalents

WS Atkins plc Annual Report 2016

–

235.4

Financial Statements > Notes to the Financial Statements

165

Financial instruments by category Group 2016

Note

Assets at fair Loans and value through receivables profit and loss £m £m

Derivatives used for hedging £m

Total £m

STRATEGIC REPORT

21 Financial instruments

Derivative financial instruments

22

–

–

3.3

3.3

Other receivables

23

29.1

–

–

29.1

Trade and other receivables excluding prepayments

24

448.8

–

–

448.8

Financial assets at fair value through profit or loss

25

–

32.9

–

32.9

Cash and cash equivalents

26

419.3

–

–

419.3

897.2

32.9

3.3

933.4

Other Liabilities financial at fair value liabilities at through profit amortised cost and loss Note £m £m

Derivatives used for hedging £m

Total £m

Total

Liabilities as per Balance Sheet Borrowings excluding finance lease liabilities

27

(280.5)

–

–

(280.5)

Finance lease liabilities

27

(0.1)

–

–

(0.1)

Derivative financial instruments

22

–

–

Trade and other payables excluding non-financial liabilities

28

Other non-current liabilities

31

Total

(275.2) – (555.8)

– (1.9) (1.9)

(1.5) – – (1.5)

GOVERNANCE

Assets as per Balance Sheet

(1.5) (275.2) (1.9) (559.2)

Derivatives used for hedging £m

Total £m

Assets as per Balance Sheet Derivative financial instruments

22

–

–

2.5

2.5

Other receivables

23

20.7

–

–

20.7 449.0

Trade and other receivables excluding prepayments

24

449.0

–

–

Financial assets at fair value through profit or loss

25

–

33.4

–

33.4

Cash and cash equivalents

26

235.4

–

–

235.4

705.1

33.4

2.5

741.0

Other Liabilities financial at fair value liabilities at through profit amortised cost and loss Note £m £m

Derivatives used for hedging £m

Total £m

Total

Liabilities as per Balance Sheet Borrowings excluding finance lease liabilities

27

(111.2)

–

–

Finance lease liabilities

27

(0.1)

–

–

Derivative financial instruments

22

–

–

Trade and other payables excluding non-financial liabilities

28

Other non-current liabilities

31

Total

(293.2) – (404.5)

(0.8)

(1.0)

–

(1.8)

–

(2.8)

(0.8)

(111.2) (0.1) (0.8) (294.2) (1.8) (408.1)

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Note

Assets at fair Loans and value through receivables profit and loss £m £m

FINANCIAL STATEMENTS

Group 2015

166

Notes to the Financial Statements continued For the year ended 31 March 2016

21 Financial instruments continued Financial instruments by category continued Company 2016

Note

Loans and receivables £m

Total £m

24

339.5

339.5

1.4

1.4

Assets as per Balance Sheet Trade and other receivables excluding prepayments Cash and cash equivalents Other receivables

1.0

1.0

341.9

341.9

Note

Other financial liabilities at amortised cost £m

Total £m

Borrowings

27

(280.5)

(280.5)

Trade and other payables excluding non-financial liabilities

28

Total

Liabilities as per Balance Sheet

Total

(51.9)

(51.9)

(332.4)

(332.4)

Company 2015

Note

Loans and receivables £m

Total £m

24

169.6

169.6

Assets as per Balance Sheet Trade and other receivables excluding prepayments Other receivables

0.9

0.9

170.5

170.5

Note

Other financial liabilities at amortised cost £m

Total £m

27

(111.2)

(111.2)

Total

Liabilities as per Balance Sheet Borrowings Bank overdraft

27

(2.6)

(2.6)

Trade and other payables excluding non-financial liabilities

28

(65.9)

(65.9)

(179.7)

(179.7)

Total

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

167

The table below shows the fair value of forward currency contracts at the year end, based on their market value: Group 2016 Assets £m

2015 Liabilities £m

Assets £m

Liabilities £m

Current

1.3

(0.5)

1.3

(0.6)

Later than one year and no later than two years

0.9

(0.6)

0.8

(0.1)

Later than two years and no later than five years

1.1

(0.4)

0.4

(0.1)

Non-current

2.0

(1.0)

1.2

(0.2)

Total

3.3

(1.5)

2.5

(0.8)

STRATEGIC REPORT

22 Derivative financial instruments

Group 2016 Sell £m

2015 Buy £m

Sell £m

Buy £m

Forward contracts to purchase GBP, sell USD

2.6

(2.5)

7.5

(6.9)

Forward contracts to purchase GBP, sell EUR

11.1

(10.8)

9.9

(10.8)

2.1

(2.0)

1.5

(1.7)

Forward contracts to purchase INR, sell GBP

Forward contracts to purchase GBP, sell Other

51.7

(61.2)

33.6

(37.8)

Forward contracts to purchase INR, sell USD

30.2

(32.6)

23.7

(25.2)

GOVERNANCE

The notional principal amounts of the outstanding foreign exchange contracts at 31 March 2016 and 2015 are as follows:

The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity derivative is more than 12 months and as a current asset or liability if the maturity of the derivative 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 £m Current

40.3

Outflow £m (38.2)

2015 Net £m

Inflow £m

Outflow £m

2.1

39.7

(39.0)

Net £m 0.7

Later than one year and no later than two years

31.3

(28.6)

2.7

22.7

(22.0)

0.7

Later than two years and no later than five years

37.5

(30.8)

6.7

15.5

(15.2)

0.3

Non-current

68.8

(59.4)

9.4

38.2

(37.2)

1.0

109.1

(97.6)

11.5

77.9

(76.2)

1.7

Total

The Group used derivative instruments to hedge foreign currency receipts and payments on current contracts, as described in note 20. All of the Group's financial instruments are classified as Level 2 under amendments to IFRS 13, Fair value measurement. A definition of Level 2 financial instruments is included in note 20. 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.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

2016

FINANCIAL STATEMENTS

The derivatives hedge highly probable forecast transactions denominated in foreign currency. The gains and losses recognised in the hedging reserve in equity on forward foreign exchange contracts as at 31 March 2016 will be recognised in the Consolidated Income Statement in the period or periods during which the hedged forecast transaction affects the Consolidated Income Statement.

168

Notes to the Financial Statements continued For the year ended 31 March 2016

23 Other receivables Group 2016 £m

Group 2015 £m

Company 2016 £m

Company 2015 £m

19.7

19.8

–

–

Non-current assets: Loan notes receivable Deferred consideration receivable

6.7

–

–

–

Deferred finance costs

1.0

0.9

1.0

0.9

Other receivables

1.7 29.1

– 20.7

–

–

1.0

0.9

During the year the Group reduced interest-bearing loan notes by £0.1m in Connect Plus (M25) Intermediate Limited (2015: decreased by £0.1m), a company in which the Group has a 10% shareholding. Under the terms of the Connect Plus M25 finance agreement, the Group had a requirement to lend Connect Plus (M25) Intermediate Limited £20m over a period from May 2009 to October 2012. This funding was 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 2016 the Group held £19.7m of interest-bearing loan notes in Connect Plus (M25) Intermediate Limited (2015: £19.8m). These loan notes mature in 2039 and have a nominal interest rate of 12% per annum. Deferred consideration receivable of £6.7m relates to the sale of part of the Group's Woodcote Grove property in Epsom, discounted at a rate of 8.1%. See note 11 for further detail. None of the other receivables are past due.

24 Trade and other receivables

Note

Group 2016 £m

Group 2015 £m

Company 2016 £m

Company 2015 £m

Current assets: Trade receivables

313.6

335.0

–

–

Less: Provision for impairment of receivables

(28.3)

(29.2)

–

–

Trade receivables – net

285.3

305.8

–

–

Amounts recoverable on contracts

135.0

114.2

–

–

Amounts due from subsidiary undertakings

39

–

–

339.2

169.4

Amounts due from joint ventures

39

1.7

6.4

–

–

0.3

0.2

0.3

0.2

26.5

22.4

–

–

Deferred finance costs Other receivables Prepayments and accrued income

31.2

27.5

–

–

480.0

476.5

339.5

169.6

The directors consider that the carrying amounts of trade and other receivables approximate their fair value. At 31 March 2016, £172.7m (2015: £153.4m) of Group trade receivables were within normal payment terms and considered to be fully performing. At 31 March 2016, £95.1m (2015: £121.0m) of Group trade receivables were past due and aged up to six months from invoice date and carry a provision for impairment of £nil (2015: nil). These Group trade receivables of £95.1m (2015: £121.0m) 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. Group trade receivables aged beyond six months of invoice date totalled £45.8m (2015: £60.6m) and carried a provision for impairment of £28.3m (2015: £29.2m).

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

169

Group 2016 £m

2015 £m

(29.2)

(23.9)

Increase in provisions

(9.4)

(14.4)

Release of provisions

11.1

10.4

Provision for impairment at beginning of year

Receivables written off as uncollectable Difference on exchange Provision for impairment at end of year

–

0.9

(0.8)

(2.2)

(28.3)

(29.2)

STRATEGIC REPORT

Movements in the Group provision for impairment of trade receivables were as follows:

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.

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.

25 Financial assets at fair value through profit or loss

GOVERNANCE

At 31 March 2016, £0.5m of the Company's amounts due from subsidiary undertakings were fully provided against (2015: £0.5m), with an in year release of provisions of £nil (2015: £nil), see note 39.

In accordance with IFRS 13, 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 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 22.

A definition of Level 1 and Level 2 financial instruments is included in note 20. There have been no changes to the classification of financial assets between Level 1 and Level 2 financial instruments at 31 March 2016 or 2015. Changes in fair values of financial assets at fair value through profit or loss include fair value loss of £0.3m (2015: £0.1m gain).

26 Cash and cash equivalents

Cash at bank and in hand Short term bank deposits

Group 2016 £m

Group 2015 £m

Company 2016 £m

Company 2015 £m

372.4

169.5

1.4

–

46.9

65.9

–

–

419.3

235.4

1.4

–

FINANCIAL STATEMENTS

For the Group's financial assets measured at fair value through profit or loss, refer to note 20.

INVESTOR INFORMATION

The effective interest rate on cash and cash equivalents was 0.4% (2015: 0.6%). Included within cash at bank and in hand is £2.2m (2015: £0.2m) held by the Company's EBTs.

WS Atkins plc Annual Report 2016

170

Notes to the Financial Statements continued For the year ended 31 March 2016

27 Borrowings Group 2016 £m

Group 2015 £m

Company 2016 £m

Company 2015 £m

7.0

61.0

7.0

61.0

Current Bank loans Bank overdraft

–

–

–

2.6

Finance leases

–

0.1

–

–

7.0

61.1

7.0

63.6

220.9

–

220.9

–

Non-current Bank loans Finance leases

0.1

–

–

–

52.6

50.2

52.6

50.2

273.6

50.2

273.5

50.2

280.6

111.3

280.5

113.8

Private placement debt

Total

The directors consider that the carrying amounts of borrowings and the private placement debt approximates their fair value. The maturity profile of the carrying amount of the non-current borrowings was as follows: Group and Company 2016

2015

Bank loans and private placement debt £m

Finance leases £m

–

0.1

273.5

–

Private placement debt £m

Finance leases £m

0.1

–

–

–

273.5

50.2

–

50.2

Total £m

Total £m

Repayable: Later than one year and no later than two years Later than two years and no later than five years Later than five years

–

–

–

–

–

–

273.5

0.1

273.6

50.2

–

50.2

Finance leases £m

Total £m

The carrying amount of borrowings are denominated in the following currencies: Group 2016 Bank loans and private placement debt £m Sterling US dollar

–

Finance leases £m –

Bank loans and private placement Total debt £m £m –

–

–

280.5

0.1

280.6

111.2

0.1

111.3

280.5

0.1

280.6

111.2

0.1

111.3

The Bank loans and private placement debt relate to the Company.

WS Atkins plc Annual Report 2016

2015

–

Financial Statements > Notes to the Financial Statements

171

Group

No later than one year Later than one year and no later than five years Future finance charges on finance leases Present value of finance lease payables

2016 £m

2015 £m

–

0.1

0.1

–

0.1

0.1

–

–

0.1

0.1

STRATEGIC REPORT

The total present value of minimum lease payments under finance leases fall due as follows:

Finance leases are on a fixed repayment basis, with interest rates fixed at the contract date. The average effective borrowing rate for the finance leases was 2.2% (2015: 12.6%) over a weighted average remaining period of 26 months (2015: 15 months).

Group 2016 £m Later than one year and no later than two years Later than two years and no later than five years

2015 £m

– 71.9

–

GOVERNANCE

Borrowing facilities The Group has the following undrawn committed borrowing facilities available at 31 March expiring as follows:

138.1

All of the Group's undrawn committed borrowing facilities will be subject to floating rates of interest.

On 11 March 2016 the Group signed a new RCF of £100m, with a maturity of three years. There is an option to extend this RCF for an additional year with the lenders' permission. This facility provides the Group with an increased and longer term financial capacity to support its strategy on favourable terms, and committed credit lines totalling £300m. The total letters of credit in issue under the committed facilities at 31 March 2016 was £0.2m (31 March 2015: £0.9m). The £100m facility has the following lenders, Bank of America Securities Limited, Barclays Bank plc, HSBC Bank plc and National Westminster Bank plc. The £200m facility additionally has the following lenders, 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 2016, and since, there have been no breaches (2015: none).

INVESTOR INFORMATION

In the financial year ended 31 March 2013, 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%.

FINANCIAL STATEMENTS

On 30 January 2016 the Group amended and extended its five year revolving credit facility (RCF). This £200m facility matures on 30 January 2021.

WS Atkins plc Annual Report 2016

172

Notes to the Financial Statements continued For the year ended 31 March 2016

28 Trade and other payables

Note

Group 2016 £m

Group 2015 £m

Company 2016 £m

Company 2015 £m

75.1

66.3

–

–

165.4

181.6

–

–

–

–

51.9

65.9

42.9

42.6

–

–

–

1.0

–

–

Current liabilities: Trade payables Fees invoiced in advance Amounts due to subsidiary undertakings Social security and other taxation Contingent consideration on acquisitions Deferred consideration on acquisitions Accruals and deferred income

39

0.7

0.6

–

–

164.9

174.0

1.2

1.2

Lease incentives

10.9

12.5

–

–

Other payables

23.1

32.2

–

–

483.0

510.8

53.1

67.1

The directors consider that the carrying values of the Group's trade and other payables approximate their fair value.

29 Provisions for other liabilities and charges Group 2016 Vacant property £m

2015 Vacant property £m

Current

1.1

0.8

Later than one year and no later than two years

1.1

1.0

Later than two years and no later than five years

1.2

0.9

Later than five years

0.5

0.7

Non-current

2.8

2.6

Total

3.9

3.4

Note

Group Vacant property £m

Balance at 1 April 2015

3.4

Provisions charged to the Income Statement

2.4

Provisions released to the Income Statement

(0.3)

Provisions utilised Unwinding of discount Balance at 31 March 2016

(1.7) 7

0.1 3.9

The vacant property provision is discounted and is expected to be utilised over the next 9 years (2015: 11 years). No provision has been released or utilised for any purpose other than that for which it was established.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

173

The Group's post-employment benefit liabilities are analysed below: Group

Net retirement benefit liabilities Other post-employment benefit liabilities

2016 £m

2015 £m

265.3

298.4

20.5

18.2

285.8

316.6

STRATEGIC REPORT

30 Post-employment benefit liabilities

a) Net retirement benefit liabilities The Group, through trustees, operates a number of defined benefit and defined contribution pension schemes.

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, Terramar AS Pension Plan in Norway, and a range of defined contribution schemes or equivalent.

GOVERNANCE

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.

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 Railways Pension Scheme recognised a curtailment gain in the year ended 31 March 2016. The curtailment gain arose for members moving from the uncapped salary category or retail price index (RPI) capped salary category to the consumer price index (CPI) capped category. The reduction in the past service liability for this curtailment is £1.5m and this has been recognised as a curtailment gain in the year ended 31 March 2016. 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.

FINANCIAL STATEMENTS

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.

The Terramar AS Pension Plan was closed to new entrants on 1 January 2009. It is a funded pension scheme and is managed by DNB (Norway's largest financial services group). In order to obtain full pension entitlements, the scheme participants are required to complete 30 years of pensionable service prior to them obtaining the right to a life-long retirement pension corresponding to the difference between 66% of the employee's salary at retirement and estimated benefits from the Norwegian National Insurance Scheme. Economic and actuarial assumptions comply with prevailing technical recommendations in Norway. The defined benefit sections of all pension schemes are mostly closed to new entrants, who are offered membership of the defined contribution section.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

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 2009. These members transferred to the Personal Retirement Savings Accounts Ireland (PRSA - Irish Life) scheme with effect from 1 April 2009.

174

Notes to the Financial Statements continued For the year ended 31 March 2016

30 Post-employment benefit liabilities continued a) Net retirement benefit liabilities continued Membership of the Group's principal pension schemes is as follows: Defined benefit schemes Atkins Pension Plan 2016 No. Members Deferred pensioners Pensioners

Defined contribution schemes

Railways Pension Scheme

2015 No.

2016 No.

2015 No.

Atkins Pension Plan 2016 No.

Faithful+Gould

2015 No.

2016 No.

2015 No.

5

5

157

180

7,703

7,630

742

897

6,669

6,859

296

300

11,542

10,684

1,517

1,285

3,539

3,461

413

394

–

–

–

–

10,213

10,325

866

874

19,245

18,314

2,259

2,182

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: 2016

2015

RPI

2.90%

3.00%

CPI

1.90%

2.00%

Limited Price Indexation (RPI-based)

2.80%

2.80%

Limited Price Indexation (CPI-based)

2.00%

2.10%

Price inflation

Rate of increase of pensions in payment

Limited Price Indexation to 2.5%

2.50%

2.50%

Fixed

5.00%

5.00%

4.40%

4.50%

Rate of increase in salaries Atkins Pension Plan Railways Pension Scheme (uncapped)

5.15%

5.25%

Railways Pension Scheme (RPI capped)

2.90%

3.00%

Railways Pension Scheme (CPI capped)

1.90%

2.00%

Atkins Pension Plan

2.90%

3.00%

Railways Pension Scheme

1.90%

2.00%

3.50%

3.50%

Men

24.3 years

24.2 years

Women

26.2 years

26.1 years

Rate of increase for deferred pensioners

Discount rate Longevity at age 65 for current pensioners

Longevity at age 65 for future pensioners (current age 45) Men

26.6 years

26.5 years

Women

28.5 years

28.4 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 Continuous Mortality Investigation (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.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

175

Other £m

0.1

2.4

0.1

2.6

–

0.2

–

0.2

–

(1.5)

Total £m

Cost of sales Current service cost Administrative expenses

–

(1.5)

Total charge

Curtailment gain

0.1

1.1

0.1

1.3

Net interest expense

7.1

2.4

0.2

9.7

Total charge to Income Statement for defined benefit schemes

7.2

3.5

0.3

11.0

–

–

43.3

43.3

7.2

3.5

43.6

54.3

Charge for defined contribution schemes Total charge to Income Statement Statement of Comprehensive Income Loss on pension scheme assets

(9.3)

–

(0.3)

(9.6)

Changes in assumptions

8.5

7.6

1.8

17.9

Remeasurements (loss)/gain recognised in other comprehensive income Net deferred and income tax charged to equity

8

Remeasurements (loss)/gain (net of deferred tax)

2015

Note

(0.8)

7.6

1.5

8.3

(2.9)

(2.6)

(0.2)

(5.7)

(3.7)

5.0

1.3

2.6

Atkins Pension Plan £m

Railways Pension Scheme £m

Other £m

Total £m

0.1

2.1

–

2.2

Cost of sales Current service cost Administrative expenses

–

0.2

–

0.2

0.1

2.3

–

2.4

Net interest expense

10.9

2.6

0.1

13.6

Total charge to Income Statement for defined benefit schemes

11.0

4.9

0.1

16.0

–

–

39.8

39.8

11.0

4.9

39.9

55.8

Total charge

Charge for defined contribution schemes Total charge to Income Statement

GOVERNANCE

Note

Railways Pension Scheme £m

FINANCIAL STATEMENTS

2016

Atkins Pension Plan £m

STRATEGIC REPORT

The components of the pension cost are as follows:

Gain on pension scheme assets Changes in assumptions Remeasurements gain/(loss) recognised in other comprehensive income Net deferred and income tax (charged)/credited to equity Remeasurements gain/(loss) (net of deferred tax)

8

225.1

16.3

1.8

243.2

(206.6)

(24.7)

(5.9)

(237.2)

18.5

(8.4)

(4.1)

6.0

(3.7)

1.7

0.5

(1.5)

14.8

(6.7)

(3.6)

4.5

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

Statement of Comprehensive Income

176

Notes to the Financial Statements continued For the year ended 31 March 2016

30 Post-employment benefit liabilities continued a) Net retirement benefit liabilities continued

2016

Atkins Pension Plan £m

Railways Pension Scheme £m

Other £m

Total £m

Defined benefit obligation

(1,529.3)

(273.2)

(19.4)

(1,821.9)

Fair value of plan assets

1,335.2

209.0

12.4

1,556.6

(194.1)

(64.2)

(7.0)

(265.3)

Retirement benefit liabilities

2015

Atkins Pension Plan £m

Railways Pension Scheme £m

Other £m

Total £m

Defined benefit obligation

(1,531.0)

(276.2)

(20.0)

(1,827.2)

Fair value of plan assets

1,312.0

205.0

11.8

1,528.8

(219.0)

(71.2)

(8.2)

(298.4)

Retirement benefit liabilities

Other includes the Atkins McCarthy Pension Plan, the Terramar AS Pension Plan and an unfunded pension obligation in relation to a former director, for £1.3m (2015: £1.2m). The Terramar AS Pension Plan had a net retirement asset of £0.2m at 31 March 2016. The major categories of plan assets as a percentage of total plan assets are as follows: Atkins Pension Plan 2016

%

Railways Pension Scheme £m

%

£m

Equities

37.0

493.6

69.7

145.8

Government bonds

43.1

575.7

15.1

31.5

Corporate bonds

14.9

31.1

10.8

144.1

Property

3.3

44.5

Cash

0.5

6.2

0.3

0.6

Other

5.3

71.1

–

–

100.0

1,335.2

100.0

209.0

Atkins Pension Plan 2015

%

–

–

Railways Pension Scheme £m

%

£m

Equities

41.0

537.4

60.5

124.0

Government bonds

39.3

516.2

14.6

29.9

Corporate bonds

11.0

144.6

14.6

29.9

2.9

37.5

10.0

20.6

Property Cash

0.4

5.7

0.3

0.6

Other

5.4

70.6

–

–

100.0

1,312.0

100.0

205.0

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.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

177

Service cost Administrative expenses

Total £m

1,531.0

276.2

20.0

1,827.2

0.1

2.4

0.1

2.6

–

0.2

–

0.2

–

(1.5)

–

(1.5)

Interest cost

52.9

9.5

0.4

62.8

Remeasurements gain recognised in other comprehensive income

(8.5)

(7.6)

(1.8)

(17.9)

Employee contributions Benefit payments Difference on exchange Defined benefit obligation at end of year

2015 Defined benefit obligation at beginning of year Business acquired Service cost Administrative expenses Interest cost Remeasurements loss recognised in other comprehensive income Employee contributions Benefit payments Difference on exchange Defined benefit obligation at end of year

– (46.2)

1.5 (7.5)

– (0.4)

1.5 (54.1)

–

–

1.1

1.1

1,529.3

273.2

19.4

1,821.9

Atkins Pension Plan £m

Railways Pension Scheme £m

Other £m

Total £m

1,302.1

245.3

13.1

1,560.5

–

–

2.7

2.7

0.1

2.1

–

2.2

–

0.2

–

0.2

57.7

10.9

0.4

69.0

206.6

24.7

5.9

237.2

– (35.5)

1.5 (8.5)

– (0.2)

1.5 (44.2)

–

–

(1.9)

(1.9)

1,531.0

276.2

20.0

1,827.2

INVESTOR INFORMATION

Curtailment gain

Other £m

GOVERNANCE

Defined benefit obligation at beginning of year

Railways Pension Scheme £m

FINANCIAL STATEMENTS

2016

Atkins Pension Plan £m

STRATEGIC REPORT

Movements in the present value of the defined benefit obligation are as follows:

WS Atkins plc Annual Report 2016

178

Notes to the Financial Statements continued For the year ended 31 March 2016

30 Post-employment benefit liabilities continued a) Net retirement benefit liabilities continued Movements in the fair value of plan assets are as follows:

2016 Fair value of plan assets at beginning of year

Atkins Pension Plan £m

Railways Pension Scheme £m

Other £m

Total £m

1,312.0

205.0

11.8

1,528.8

Interest return on plan assets

45.8

7.1

0.2

53.1

Employer contributions

32.9

2.9

0.5

36.3

Employee contributions Benefits paid Remeasurements loss recognised in other comprehensive income

– (46.2)

–

1.5

(0.4)

(54.1)

–

(0.3)

(9.6)

–

–

0.6

0.6

1,335.2

209.0

12.4

1,556.6

Atkins Pension Plan £m

Railways Pension Scheme £m

Other £m

Total £m

1,043.5

184.6

8.2

1,236.3

–

–

2.8

2.8

Interest return on plan assets

46.8

8.3

0.3

55.4

Employer contributions

32.1

2.8

0.4

35.3

Difference on exchange Fair value of plan assets at end of year

2015 Fair value of plan assets at beginning of year Business acquired

Employee contributions

(9.3)

1.5 (7.5)

–

1.5

Benefits paid

(35.5)

(8.5)

Remeasurements gain recognised in other comprehensive income

225.1 – 1,312.0

Difference on exchange Fair value of plan assets at end of year

WS Atkins plc Annual Report 2016

–

1.5

(0.2)

(44.2)

16.3

1.8

243.2

–

(1.5)

(1.5)

205.0

11.8

1,528.8

Financial Statements > Notes to the Financial Statements

179

Other £m

Total £m

(219.0)

(71.2)

(8.2)

(0.1)

(2.4)

(0.1)

(2.6)

–

(0.2)

–

(0.2)

Net finance costs

(7.1)

(2.4)

Curtailment gain

–

1.5

–

1.5

Contributions

32.9

2.9

0.5

36.3

Remeasurements (loss)/gain recognised in other comprehensive income

(0.8)

7.6

1.5

8.3

–

(0.5)

(0.5)

(7.0)

(265.3)

Service cost Administrative expenses

Difference on exchange Net retirement benefit liabilities at end of year

2015 Net retirement benefit liabilities at beginning of year Business acquired Service cost Administrative expenses Net finance costs

– (194.1)

Atkins Pension Plan £m (258.6)

(64.2) Railways Pension Scheme £m (60.7)

(0.2)

Other £m (4.9)

(298.4)

(9.7)

Total £m (324.2)

–

–

0.1

(0.1)

(2.1)

–

–

(0.2)

–

(0.2)

(2.6)

(0.1)

(13.6)

(10.9)

0.1 (2.2)

Contributions

32.1

2.8

0.4

35.3

Remeasurements gain/(loss) recognised in other comprehensive income

18.5

(8.4)

(4.1)

6.0

– (219.0)

– (71.2)

0.4

0.4

(8.2)

(298.4)

INVESTOR INFORMATION

Difference on exchange Net retirement benefit liabilities at end of year

GOVERNANCE

Net retirement benefit liabilities at beginning of year

Railways Pension Scheme £m

FINANCIAL STATEMENTS

2016

Atkins Pension Plan £m

STRATEGIC REPORT

Movements in the net retirement benefit liabilities are as follows:

WS Atkins plc Annual Report 2016

180

Notes to the Financial Statements continued For the year ended 31 March 2016

30 Post-employment benefit liabilities continued a) Net retirement benefit liabilities continued Cumulative remeasurement effects recognised in other comprehensive income are as follows:

2016 Losses at the beginning of year

Atkins Pension Plan £m

Railways Pension Scheme £m

Other £m

Total £m

(236.0)

(45.1)

(15.9)

(297.0)

Net remeasurement losses recognised in the year:

(0.8)

7.6

1.5

8.3

– Gain from change in financial assumptions

8.5

4.7

1.8

15.0

– Experience gains

–

2.9

–

2.9

Actuarial gain on defined benefit obligation arising during the year

8.5

7.6

1.8

17.9

Return on plan assets less than discount rate

(9.3)

–

(0.3)

(9.6)

(14.4)

(288.7)

Losses at the end of year

2015 Losses at the beginning of year

(236.8)

Atkins Pension Plan £m

(37.5) Railways Pension Scheme £m

Other £m

Total £m

(254.5)

(36.7)

(11.8)

(303.0)

Net remeasurement losses recognised in the year:

18.5

(8.4)

(4.1)

6.0

– Loss from change in financial assumptions

(206.6)

(24.7)

(6.1)

(237.4)

0.2

0.2

– Experience gains Actuarial loss on defined benefit obligation arising during the year Return on plan assets greater than discount rate Losses at the end of year

–

–

(206.6)

(24.7)

(5.9)

(237.2)

225.1

16.3

1.8

243.2

(236.0)

(45.1)

(15.9)

(297.0)

The return on plan assets is as follows:

2016 Expected return on plan assets Experience loss on plan assets

Atkins Pension Plan £m

Railways Pension Scheme £m

Other £m

Total £m

45.8

7.1

0.2

53.1

(9.3)

–

(0.3)

(9.6)

36.5

7.1

(0.1)

43.5

Atkins Pension Plan £m

Railways Pension Scheme £m

Other £m

Total £m

Expected return on plan assets

46.8

8.3

0.3

55.4

Experience gain on plan assets

225.1

16.3

1.8

243.2

Actual return on plan assets

271.9

24.6

2.1

298.6

Actual return on plan assets

2015

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

181

Experience (loss)/gain on scheme assets Percentage of scheme assets

2016 Total

2015 Total

2014 Total

2013 Total

2012 Total

£(9.6)m

£243.2m

£(20.1)m

£106.4m

£83.8m

(0.6)%

15.9%

(1.6)%

8.8%

7.8%

Experience gain/(loss) on scheme liabilities

£2.9m

£0.2m

£6.2m

£(1.9)m

£4.4m

Percentage of defined benefit obligation

(0.2)%

(0.0)%

(0.4)%

0.1%

(0.3)%

Defined benefit obligation

£(1,821.9)m

£(1,827.2)m

£(1,560.5)m

£(1,491.2)m

£(1,329.8)m

Fair value of plan assets

£1,556.6m

£1,528.8m

£1,236.3m

£1,209.2m

£1,078.7m

Net retirement benefit liabilities

£(265.3)m

£(298.4)m

£(324.2)m

£(282.0)m

£(251.1)m

STRATEGIC REPORT

History of experience gains and losses:

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 agreed a new repayment plan that ends in March 2025. One-off payments of £32m were made for the years ended 31 March 2014 and 31 March 2015. A payment of £32.8m was made for the year ended 31 March 2016 and future payments will continue to escalate by 2.5% per annum.

GOVERNANCE

The Group completed its last triennial valuation as at 31 March 2013 of the Atkins Pension Plan and is therefore due to complete its next triennial valuation as at 31 March 2016. The Group will engage with the Trustee during the coming year to agree the new funding position and associated funding plan.

The Group expects employer contributions to be paid during the financial year to 31 March 2017 to be around £36.7m, of which £33.6m 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 2017 are £nil. The approximate effect on the liabilities from changes in the main assumptions used to value the liabilities are as follows:

Atkins Pension Plan

Railways Pension Scheme

Discount rate

increase/decrease 0.5%

decrease/increase 10.0%

decrease/increase 8.5%

Inflation

increase/decrease 0.5%

increase/decrease 5.0%

increase/decrease 8.5%

Real rate of increase in salaries

increase/decrease 0.5%

increase/decrease 2.0%

increase/decrease 1.5%

increase 1 year

increase 3.0%

increase 2.0%

Longevity

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.

FINANCIAL STATEMENTS

Effect on plan liabilities Change in assumption

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

INVESTOR INFORMATION

The effect of the change in inflation on liabilities assumes a corresponding change in salary increases and inflation-related pension increases.

WS Atkins plc Annual Report 2016

182

Notes to the Financial Statements continued For the year ended 31 March 2016

30 Post-employment benefit liabilities continued 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 postretirement 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. Group

Other post-employment obligations at beginning of year

2016 £m

2015 £m

18.2

14.8

Current service cost and other comprehensive income

4.2

3.9

Interest cost

0.9

0.7

Net measurement gain recognised in the year Benefit payments Difference on exchange Other post-employment obligations at end of year

–

(0.1)

(3.7)

(3.2)

0.9

2.1

20.5

18.2

The main assumptions used for the IAS 19 valuation of other post-employment benefits are listed in the table below: 2016

2015

Gratuity scheme Discount rate

5.00%

5.00%

Salary inflation

3.00%

3.00%

Average remaining service period

2 years

2 years

1.55%

1.10%

Discount rate

3.80%

3.55%

Healthcare cost trend rate for next year

8.00%

7.50%

Rate of decline of cost trend rate

5.00%

5.00%

2026

2023

KESOP scheme Discount rate Medical plan

Year that rate reaches ultimate trend rate

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.

WS Atkins plc Annual Report 2016

183

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.

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

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 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.

GOVERNANCE

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). Whilst some of the Plan’s assets are real in nature and so loosely correlated with inflation (e.g. equities, index-linked gilts), some of the Plan’s assets are not expected to move in line with inflation (e.g. fixed-interest gilts). Therefore an increase in inflation is likely to also increase the deficit.

Expected maturity analysis of other post-employment benefit liabilities are as follows: Less than a year

Between 1–2 years

KESOP (US$m)

0.2

0.2

Post-retirement medical benefit schemes (US$m)

0.1

0.1

At 31 March 2016

Between 2–5 years

Over 5 years

Total

–

–

0.4

0.3

0.4

0.9

Atkins Pension Plan

Railways Pension Scheme

2016 %

2015 %

2016 %

2015 %

0.0

0.0

37.0

37.0

Proportion relating to deferred members

64.0

64.0

15.0

15.0

Proportion relating to pensioners

36.0

36.0

48.0

48.0

100.0

100.0

100.0

100.0

Proportion relating to active members

Total

FINANCIAL STATEMENTS

An approximate analysis of the obligations for the two main defined benefit schemes is given in the table below:

Expected future benefit payments from the Atkins Pension 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 2017 to be approximately £55.8m.

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

The weighted average duration of the defined benefit obligation is 20 years (2015: 20 years) for the Atkins Pension Plan, 16 years (2015: 16 years) for the Railways Pension Scheme, between 25 and 30 years (2015: between 25 and 30 years) for the McCarthy Pension Plan and between 25 and 35 years (2015: between 25 and 35 years) for the Terramar AS Pension Plan.

184

Notes to the Financial Statements continued For the year ended 31 March 2016

31 Other non-current liabilities Group 2016 Contingent consideration £m

2015

Deferred bid costs recovered £m

Total £m

Deferred bid costs recovered £m

Contingent consideration £m

Total £m

Deferred PPP/PFI bid costs recovered and contingent consideration, maturing: Later than one year and no later than two years

1.9

–

1.9

0.9

0.1

1.0

Later than two years and no later than five years

–

0.2

0.2

0.9

0.1

1.0

–

1.1

1.1

–

1.2

1.2

1.9

1.3

3.2

1.8

1.4

3.2

Later than five years

32 Ordinary shares Group and Company 2016 No. shares

2015 £m

No. shares

£m

Issued, allotted and fully paid ordinary shares of 0.5p each At 1 April and at 31 March

104,451,799

0.5

104,451,799

0.5

At the 2015 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 10 June 2015) for a period ending on the earlier of the next AGM or 30 September 2016, 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 Tuesday 2 August 2016 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 0.5p each (nominal value £21,705) held as treasury shares. No shares were purchased during the year ended 31 March 2016 (2015: nil). The 4,341,000 treasury shares, which represent approximately 4.2% of the total (2015: 4.2%) of the called-up share capital as at the date of this report, have not been cancelled and represent a deduction from shareholders' equity.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

185

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 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 the Remuneration Committee's assessment of the Group's progress against its strategy. 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 gain will normally be calculated using the six-month average share price. Any gain on exercise will usually be settled in equity, except in the US, where awards are granted as market value options and are scaled back on exercise to be equivalent in value to the gain that would have been received under a non-US award. 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.

STRATEGIC REPORT

33 Share-based payments

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 growth in diluted EPS over the performance period. Full vesting is triggered if the EPS growth in the three-year performance period is 12% per annum or higher. 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 EPS growth. 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.

GOVERNANCE

As a general rule, units 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.

The remaining 50% of grants made to executive directors and senior employees was subject to the Company's real growth in underlying EPS over the performance period. Full vesting was triggered if the increase in real EPS growth above UK RPI in the three-year performance period was 10% per annum or higher. If the increase above UK RPI was less than 4% per annum, there was no vesting. If the EPS increase was 4% per annum above UK RPI, vesting was at 30%, and a sliding scale operated between 4% and 10% per annum. Awards granted to other participants were subject solely to the EPS condition. 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.

FINANCIAL STATEMENTS

Atkins Long Term Incentive Plan (LTIP) September 2006 to July 2011 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. Different performance targets were used for different categories of management. Grants made to executive directors and senior employees had 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 took place if the Company was ranked in the upper quartile and 30% vesting was achieved with a median ranking, with pro rata vesting for intermediate performance. No vesting occurred for a ranking below median.

INVESTOR INFORMATION

Subject to vesting, participants are entitled to receive the benefit of dividends declared following grant, without interest.

WS Atkins plc Annual Report 2016

186

Notes to the Financial Statements continued For the year ended 31 March 2016

33 Share-based payments continued 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 was no performance condition but awards were restricted for at least three years from the date of grant. 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 their award in full. Subject to vesting, some awards entitle participants 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, which are granted in relation to the Executive Bonus Scheme, are normally restricted for three years from the date of grant. The Group's share-based payments charge for the year of £11.5m (2015: £11.3m) 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

2016 £m

2015 £m

9.4

8.6

2.1

2.7

11.5

11.3

3.6

4.9

As at 31 March 2016 the following awards were outstanding: LTIPs

No.

LGU

Weighted average exercise/ transfer price

No.

DBP/DSP

Weighted average exercise/ transfer price

No.

Weighted average exercise/ transfer price

Awards outstanding at 1 April 2014

636,421

–

348,062

238.71p

3,288,985

–

Granted

155,376

–

121,233

401.05p

948,012

–

Exercised/transferred

(117,665)

–

–

–

(741,211)

–

Lapsed

(48,972)

–

–

–

(2,039)

–

Forfeited

(20,276)

–

(17,875)

–

(113,043)

–

Awards outstanding at 1 April 2015

604,884

–

451,420

291.76p1

3,380,704

–

Granted

149,211

–

131,030

440.19p

704,339

–

Exercised/transferred

(171,792)

–

–

–

(1,054,160)

–

Lapsed

(72,456)

–

–

–

(2,300)

–

Forfeited

(49,173)

–

(73,013)

878.81p

(160,344)

–

Awards outstanding at 31 March 2016

460,674

–

509,437

245.80p

2,868,239

–

1. Restated

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 1500.47 pence (2015: 1337.64 pence).

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

187

Weighted average remaining Maximum contractual term life

Exercise/ Scheme

Award date

transfer price

Scheme maturity

Awards Awards outstanding exercisable at 31 March at 31 March 2016 2016

LGUs LGU (August 2012 onwards non-US)

13/08/2012 to 25/06/2015

0.0p

4 to 6 years

10 years

7.77 years

387,717

–

LGU (August 2012 onwards US)

13/08/2012 to 25/06/2015

667.0p to 1545.0p

4 to 6 years

10 years

7.55 years

121,720

–

13/08/2012 to 25/06/2015

0.0p

2.6 to 3 years

2.6 to 10 years

7.38 years

443,545

7,083

LTIP 11/09/2006 (September 2006 to July 2012 EPS) to 03/08/2007

0.0p

3 years

3 to 10 years

1.13 years

17,129

17,129

29/06/2006 to 30/11/2007

0.0p

3 years

10 years

0.73 years

12,307

12,307

29/06/2007 to 22/12/2015

0.0p

1 to 3 years

1 to 10 years

6.15 years

2,855,932

501,738

STRATEGIC REPORT

A summary of awards outstanding as at 31 March 2016 is as follows:

LTIP (August 2012 onwards)

DSPs DBP DSP

GOVERNANCE

LTIPs

On 25 June 2015 the Company issued awards over 658,098 shares to employees under the DSP, 149,211 shares to employees under the LTIP and 131,030 units to employees under the LGU. On 22 December 2015 the Company issued awards over 46,241 shares to employees under the DSP. At 31 March 2016 the Company's EBTs held a beneficial interest in 2,819,874 shares (2015: 2,944,156 shares) at a nominal value of £0.0m (2015: £0.0m) and market value of £38.6m (2015: £37.6m).

The total fair value of awards granted during the year was £14.1m (2015: £14.8m). 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 expected volatility has been based on an evaluation of the historical volatility of the Company’s share price, particularly over the historical period commensurate with the expected term of the award. The assumptions used in the model are as follows:

FINANCIAL STATEMENTS

The weighted average fair value of awards granted during the year was 1428.72 pence (2015: 1211.09 pence).

Risk-free interest rate Volatility of share price

1360.41p

1360.41p

1360.41p

1.304%

1.540%

1.652%

34.0%

34.0%

34.0%

Share price at grant

1557.00p

1557.00p

1557.00p

Base value (six-month average) share price at grant date

1360.41p

1360.41p

1360.41p

4 years

5 years

6 years

Expected term (from grant date)

LGU 2015 Exercise price (six-month average) at grant date Risk-free interest rate Volatility of share price

1329.02p

1329.02p

1329.02p

1.176%

1.403%

1.554%

34.0%

34.0%

34.0%

Share price at grant

1303.00p

1303.00p

1303.00p

Base value (six-month average) share price at grant date

1329.02p

1329.02p

1329.02p

4 years

5 years

6 years

Expected term (from grant date)

WS Atkins plc Annual Report 2016

INVESTOR INFORMATION

LGU 2016 Exercise price (six-month average) at grant date

188

Notes to the Financial Statements continued For the year ended 31 March 2016

34 Cash generated from/(used in) continuing operations

Note Operating profit/(loss) for the year Other non-cash costs

Group 2016 £m

Group 2015 £m

Company 2016 £m

143.4

118.5

0.1

4.8

–

Company 2015 £m

(0.2)

(4.9) –

Depreciation charges

17

18.2

16.3

–

–

Impairment of goodwill

15

–

2.8

–

2.9

3.2

1.5

–

–

16

11.9

13.0

–

–

Amortisation of deferred acquisition payments Amortisation of intangible assets Share-based payment charge

33

9.4

8.6

–

–

Pension curtailment gain

30

(1.5)

–

–

–

–

–

–

0.1

–

–

Profit on sale of property, plant and equipment

(6.7)

Loss on sale of intangible assets

–

Movement in provisions

29

0.5

(0.7)

Movement in trade and other receivables

24

(16.7)

(38.8)

Movement in payables

28

(13.0)

Movement in non-current payables Pension deficit funding

0.1 30

–

–

(3.9)

(0.1)

41.1

(0.4)

2.7

(1.3)

(6.0)

–

(32.8)

(32.0)

116.1

133.9

1 April 2015 £m

Cash flow £m

Other noncash changes £m

235.4

180.4

–

3.5

419.3

21.8

(1.7)

–

–

20.1

Cash generated from/(used in) continuing operations

–

–

(10.5)

0.6

35 Analysis of net funds

Cash and cash equivalents Loan notes receivable Financial assets at fair value through profit or loss

33.4

(0.5)

Borrowings due no later than one year

(61.0)

–

Borrowings due later than one year

(50.2)

Finance leases Net funds

(164.7)

–

Exchange At movement 31 March 2016 £m £m

–

32.9

54.0

–

(7.0)

(54.0)

(4.6)

(0.1)

0.1

(0.1)

–

179.3

13.6

(0.1)

(1.1)

(273.5) (0.1) 191.7

Included within loan notes receivable is £0.4m (2015: £2.0m) relating to amounts receivable within less than 12 months from joint venture entities.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

189

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 2016 includes £0.2m letters of credit issued as a result of the acquisition on 1 October 2010 of PBSJ (2015: £0.9m). Group companies are from time to time involved in claims and litigation. The Group carries significant Professional Indemnity insurance cover for such claims.

37 Operating lease arrangements

STRATEGIC REPORT

36 Contingent liabilities

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 £m

2015 Vehicles, plant and equipment £m

Property £m

Vehicles, plant and equipment £m

No later than one year

42.2

6.7

46.7

7.3

Later than one year and no later than five years

82.0

8.3

97.3

8.2

Later than five years

70.7

0.3

24.5

194.9

15.3

168.5

–

GOVERNANCE

2016

15.5

The Company had no operating lease commitments as at 31 March 2016 (2015: none).

2016 Property £m

2015 Property £m

No later than one year

2.7

3.0

Later than one year and no later than five years

3.1

4.6

–

0.1

5.8

7.7

Group

Later than five years

The Company had no operating lease receivables as at 31 March 2016 (2015: none).

38 Capital and other financial commitments

FINANCIAL STATEMENTS

At the end of the reporting period, the future minimum lease payments under non-cancellable operating leases are receivable as follows:

Group 2015 £m

3.8

2.7

INVESTOR INFORMATION

Capital expenditure contracted for but not incurred - property, plant and equipment

2016 £m

WS Atkins plc Annual Report 2016

190

Notes to the Financial Statements continued For the year ended 31 March 2016

39 Related party transactions Details of the directors' shareholdings, share options and remuneration are given in the Remuneration report (page 80), which forms part of these Financial Statements. Transactions with the retirement benefit schemes are shown in note 30. Details of the Company's subsidiaries and joint ventures are shown in note 41. 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 (2015: £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

2016 £m

2015 £m

42.5

30.7

–

–

b) Group year end balances arising from sales/purchases of goods and services to/from joint ventures and loans provided to joint ventures Group

Receivables from joint ventures

Note

2016 £m

2015 £m

24

1.7

6.4

–

–

Receivables from joint ventures are shown net of contract-related provisions of £nil (2015: £nil). Payables to joint ventures

c) Group year end balances arising from loans provided to other related parties Group

Receivables from related parties

Note

2016 £m

2015 £m

23

19.7

19.8

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 (2015: £nil). The Company did not purchase any goods or services from its subsidiaries during the year (2015: £nil). e) Company year end balances with subsidiaries Company Note

2016 £m

2015 £m

Receivables from subsidiaries

24

339.2

169.4

Payables to subsidiaries

28

51.9

65.9

Receivables from subsidiaries are shown net of impairment of £0.5m (2015: £0.5m).

WS Atkins plc Annual Report 2016

191

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 (SLT). Group 2016 £m

2015 £m

Short-term employee benefits

6.3

7.3

Post-employment benefits

0.1

0.1

Share-based payments

1.5

2.3

7.9

9.7

STRATEGIC REPORT

Financial Statements > Notes to the Financial Statements

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.

Acquisition of projects, products and technology (PP&T) segment of EnergySolutions After the balance sheet date, on 11 April 2016, the Group acquired the PP&T segment of EnergySolutions for a cash consideration of $318m (approximately £226m), subject to working capital adjustments. The acquisition includes the integration of 650 staff who deliver a wide range of technical engineering and programme management services for the decontamination and decommissioning of high hazard nuclear facilities. Most of these staff are based in North America. The transaction included purchasing the entire share capital of EnergySolutions EU Services Ltd (UK), Duratek, Inc. (US), BNG America, LLC (US), P&T Global Solutions, LLC (US) and EnergySolutions Canada Group Ltd (Canada).

GOVERNANCE

40 Events occurring after the reporting period

The acquisition expands the Group’s service offering in the nuclear energy sector and will significantly enhance the Group’s current nuclear capability, particularly in North America. PP&T also adds a significant portfolio of innovative, proprietary nuclear waste treatment technologies.

INVESTOR INFORMATION

The information given above for PP&T has been given as the acquisition was made after the reporting period but before these Financial Statements were signed and authorised for issue. At the time that these Financial Statements were signed and authorised for issue, the initial accounting for the business combination was incomplete, mainly due to the Group still working on finalising the fair value calculations of the acquired identifiable intangible assets. As a result, disclosures around the opening balance sheet, goodwill, fair value adjustments and preacquisition income statement have not been made.

FINANCIAL STATEMENTS

As PP&T was acquired on 11 April 2016, no revenue or profit or loss relating to the acquired businesses has been included in the Group’s Consolidated Income Statement or the Group's Consolidated Statement of Comprehensive Income. £3.3m of acquisition related costs have been included in the period ended 31 March 2016.

WS Atkins plc Annual Report 2016

192

Notes to the Financial Statements continued For the year ended 31 March 2016

41 Details of related undertakings of WS Atkins plc a) Subsidiary undertakings The following companies were subsidiary undertakings as at 31 March 2016: Name

Share class(es) held

% of share class/ interests held

Registered office/principal place of business

A.C.N. 098 304 440 Pty Ltd1

AUD1 ordinary share

100%

(1)

Anthony Acquisition Corp.1

US$ Series A common stock with no par value

100%

(2)

Aquarius International Consultants Pty Ltd1

AUD1 class B share

100%

(1)

AUD1 class C share

100%

AUD1 ordinary share

100%

Atkins (Trinidad) Limited1

TTD ordinary shares with no par value

100%

Atkins (US)1

US$1 ordinary class B share

100%

(4)

Atkins Aberdeen Limited1

£1 ordinary A share

100%

(5)

(3)

£1 ordinary B share

100%

Atkins ATK Limited1

£1 ordinary share

100%

(4)

Atkins Australasia Pty Ltd1,2

AUD1 ordinary B class share

100%

(1)

AUD1 ordinary C class share

100%

AUD1 class D share

100%

AUD1 ordinary share

100%

Atkins Bennett (Holdings) Limited1

£0.01 ordinary share

100%

(4)

Atkins Bennett Limited1

£1 ordinary share

100%

(4)

Atkins Beta Limited2

£1 ordinary share

100%

(4)

Atkins Boreas Consultants Limited1

£1 ordinary A share

100%

(5)

£1 ordinary B share

100%

Atkins Brazil Holdings LLC1

N/A – membership interest

100%

(2)

Atkins B.V.1

€100.00 ordinary share

100%

(6)

Atkins China Limited2,3

HKD1 ordinary share

100%

(7)

Atkins Consultancy Services Limited1

£1 ordinary share

100%

(4)

Atkins Consultants (Beijing) Company Limited1

US$1.00 ordinary share

100%

(8)

Atkins Consultants (Shenzen) Co. Ltd1,2

US$1.00 ordinary share

100%

(9)

Atkins Consultants Limited1

£1 ordinary share

100%

(4)

Atkins Consulting Canada Limited1

CAD common shares with no par value

100%

(10)

Atkins Danmark A/S1,2

DKK1,000 ordinary share

100%

(11)

Atkins Design Engineering Consultants Pte. Ltd1

SGD1 ordinary share

100%

(12)

Atkins Gamma Limited2

£1 ordinary share

100%

(4)

Atkins Investments Limited1

£1 ordinary share

100%

(4)

Atkins Investments UK Limited2

£1 ordinary share

100%

(4)

Atkins Limited1,2

£1 ordinary share

100%

(4)

Atkins Luxembourg S.à r.l.1,2

€1 ordinary share

100%

(13) (2)

Atkins Michigan, Inc.1

US$0.01 common stock

100%

Atkins MSL Engineering Limited1

£1 ordinary share

100%

(4)

Atkins Norge AS1

NOK50 ordinary share

100%

(14)

Atkins North America, Inc.1,2

US$5 common stock

100%

(2)

Atkins Nuclear Secured Holdings Corporation1

US$0.10 common share

100%

(15)

Atkins Nuclear Solutions US, Inc.1

US$ common stock with no par value

100%

(15)

Atkins Pension Trustee Limited1

£1 ordinary share

100%

(4)

Atkins Rail Limited

£1 ordinary share

100%

(4)

Atkins Sverige AB1,2

SEK100 ordinary share

100%

(16)

Atkins ULC1

US$1 ordinary share

100%

(4)

Atkins US Holdings, Inc.1

US$1 common stock

100%

(2)

Atkins, Inc.1

US$0.10 common share

100%

(2)

Broomco (985) Limited1

£0.10 ordinary share

100%

(4)

Carnelian Limited1

£1 ordinary share

100%

(4)

Confab Limited

£1 ordinary share

100%

(4)

Confluence Project Management Private Limited1

INR10 ordinary share

100%

(18)

Faithful and Gould Limited1

HKD1 ordinary share

100%

(7)

Faithful and Gould Project Management Limited1

HKD1 ordinary share

100%

(7)

Faithful e Gould Consultores em Projetos de Design Ltda1

BRL1 ordinary share

100%

(18)

Faithful+Gould (Holdings) Limited1

£1 ordinary share

100%

(4)

Faithful+Gould (Malaysia) SDN BHD1

RM1 ordinary share

50%

(19)

WS Atkins plc Annual Report 2016

% of share class/ interests held

Registered office/principal place of business (12)

Faithful+Gould Asia Pacific Pte. Ltd1

SGD1 ordinary share

100%

Faithful+Gould Limited1,2

£1 ordinary share

100%

(4)

Faithful+Gould Nigeria Limited1

NGN1 ordinary share

100%

(20)

Faithful+Gould Project Management Pte. Ltd1

SGD1 ordinary share

100%

(12)

Faithful+Gould Pte. Limited1

SGD1 ordinary share

100%

(12)

Faithful+Gould Saudi Arabia Limited1

SAR1,000 ordinary share

100%

(21)

Faithful+Gould, Inc.1,2

US$0.01 common share

100%

(2)

Hanscomb (Russia) Limited1

£1 ordinary share

100%

(4)

Hanscomb (UK) Limited1

£1 ordinary share

100%

(4)

Hanscomb Europe Limited1

£1 ordinary share

100%

(4)

Hanscomb, Inc.1

US$0.01 ordinary share

100%

(2)

Houston Offshore Engineering, LLC1

US$1 share

100%

(22)

Kins Developments Limited4

£1 ordinary share

100%

(4)

Kins Holdings Limited

£0.25 ordinary share

100%

(4)

London Group Projects Limited1

£1 ordinary share

100%

(4)

Network Train Engineering Services Limited1

£1 ordinary share

100%

(4)

Opal Engineering Limited1

£1 ordinary share

100%

(4)

Parfab Limited

£1 ordinary share

100%

(4)

PBS&J Constructors, Inc.1

US$0.01 common stock

100%

(2)

PBS&J International, Inc.1

US$0.01 common stock

100%

(2)

PRBC, Inc.1

US$0.10 common stock

100%

(2)

The Atkins North America Holdings Corporation1

US$ common share with no par value

100%

(2)

Ventron Technology Limited1

£1 ordinary share

100%

(4)

WS Atkins & Partners Overseas1,2

£1 ordinary share

100%

(23)

WS Atkins & Partners Overseas Engineering Consultants1,2 SAR100 ordinary share

70%

(24)

WS Atkins (India) Private Limited1,2

INR100 ordinary share

100%

(25)

WS Atkins (Malaysia) SDN. BHD1

RM1 ordinary share

100%

(19)

WS Atkins (No. 3 Trustees) Limited5

£1 ordinary share

100%

(4)

WS Atkins (Trustees) Limited6

£1 ordinary share

100%

(4)

WS Atkins (UK Holdings) Limited

£1 ordinary share

100%

(4)

WS Atkins Architects Limited

£1 ordinary share

100%

(4)

WS Atkins Cedac Limited1

£1 ordinary share

100%

(4)

WS Atkins Insurance (Guernsey) Limited1,2

£1 ordinary share

100%

(4)

WS Atkins International & Co. LLC1

OMR1 ordinary share

65%

(26) (6)

WS Atkins International B.V.

€453.78 ordinary share

100%

WS Atkins International Limited1,2

£1 ordinary share

100%

(4)

WS Atkins Ireland (Holdings) Limited

€1.25 ordinary share

100%

(27)

€1.25 cumulative redeemable preference share

100%

WS Atkins Ireland Limited1

1.2697 ordinary share

100%

(27)

WS Atkins Overseas Limited1

£1 ordinary share

100%

(23)

WS Atkins Powertrack Limited1

£1 ordinary share

100%

(4)

WS Atkins Property Services Limited1

£1 ordinary share

100%

(4)

WS Atkins Quest Trustee Limited

£1 ordinary share

100%

(4)

WS Atkins, Inc.1,2

US$1 common stock

100%

(2)

1. Owned by a subsidiary undertaking other than WS Atkins plc. 2. Principal subsidiary. 3. WS Atkins plc owns 99.999% of Atkins China Limited directly and 0.001% jointly with Atkins Limited. 4. WS Atkins plc owns 50.098% of Kins Developments Limited directly and 49.902% jointly with Atkins Limited. 5. WS Atkins plc owns 50% of WS Atkins (No. 3 Trustees) Limited directly and 50% jointly with Atkins Limited. 6. WS Atkins plc owns 99% of WS Atkins (Trustees) Limited directly and 1% jointly with Atkins Limited.

The country of incorporation matches the country in which the registered office/principal place of business is located. All the subsidiary undertakings noted above are included in the consolidation. All the subsidiary undertakings noted above operate in the country of registration, except for WS Atkins & Partners Overseas and WS Atkins Overseas Limited, which operate in the Middle East.

WS Atkins plc Annual Report 2016

GOVERNANCE

Share class(es) held

FINANCIAL STATEMENTS

Name

STRATEGIC REPORT

193

INVESTOR INFORMATION

Financial Statements > Notes to the Financial Statements

194

Notes to the Financial Statements continued For the year ended 31 March 2016

41 Details of related undertakings of WS Atkins plc continued a) Subsidiary undertakings continued Key to registered office/principal place of business (1) Level 13, 140 St Georges Terrace, Perth WA 6000, Australia (2) 4030 West Boy Scout Boulevard, Suite 700, Tampa FL 33607, United States (3) 23 Taylor Street, Woodbrook, Port of Spain, Trinidad and Tobago (4) Woodcote Grove, Ashley Road, Epsom, Surrey, KT18 5BW, England & Wales (5) Kirkgate House, St. Nicholas Centre, Aberdeen, AB10 1HW, Scotland (6) Parellaan 14, 2132WS, Hoofddorp, Netherlands (7) 13/F Wharf T&T Centre, Harbour City, Tsim Sha Tsui, Kowloon, Hong Kong (8) Unit 1011-1015, 10th Floor, Building No 8, Tower A, No 91 Jian Guo Road, Chao Yang District, Beijing, 100022, China (9) Unit 09-16, 3501-02, 35/F, Shun Hing Square, Di Wang Commercial Center, 5002 Shen Nan Dong Road, Shenzen, China (10) 300 – 1801 Hollis Street, Halifax NS B3J 3N4, Canada (11) Arne Jacobsens Alle 17, 2300 Kobenhavn S., Denmark (12) 8 Cross Street, #24-01, PwC Building, Singapore, 048424, Singapore (13) 99 Grand Rue, L-1661 Luxembourg, Grand Duchy of Luxembourg, Luxembourg (14) 5. etasje, Vollsevien 13C, 1366 Lysaker, 0219 BÆRUM, Norway (15) 7400 Carmel Executive Park Dr., STE 120 Charlotte NC 28266-8503, United States (16) Lilla Nygatan, 7, 211 38, Malmö, Sweden (17) G-3 TV Industrial Estate, 248/A S K Ahire, Marg Worli, Mumbai, 400030, Maharashtra, India (18) Av. Rio Branco, No. 311, Sala 511 (parte), Centro, Rio de Janeiro, RJ, 20.040-903, Brazil (19) Suite 21.02 and 03, 21st floor, Menara Haw Par, Jalan Sultan Ismail, 50250, Kuala Lumpur, Malaysia (20) Plot 252E, Muri Okunola Street, Victoria Island, Lagos, Nigeria (21) PO Box 56684, Riyadh 11584, Saudi Arabia (22) 17220 Katy Freeway, Suite 200, Houston 200, TX 77074, United States (23) Suite B, Ground Floor, Regal House, Queensway, Gibraltar (24) Al-Faisaliah Tower, South Link Building Unit, 2nd Floor, PO Box 301702, Riyadh, 11372, Saudi Arabia (25) 10th Floor, Safina Towers, No. 3, Ali Asker Road, Bangalore, Karnataka-KA, 560052, India (26) 2nd Floor, Hatat House Complex B, Wadi Adai, Muscat, PO Box 2985, Oman (27) Atkins House, Units 150-155 Airside Business Park, Swords, co Dublin, Ireland b) Significant holdings The following companies were the significant holdings as at 31 March 2016: % of share class/ interests held

Registered office/principal place of business

Name

Share class(es) held

AMA Nuclear Limited1

£1 ordinary share

Confluence Project Management LLC1

AED1,000 ordinary share

DG21 LLC1 DGM21 LLC1 Engage SNC

N/A – membership interest

25%

(5)

Faithful&Gould Qatar LLC1

QAR1,000 ordinary share

49%

(6)

GET-NSA, LLC1

N/A – membership interest

49%

(7)

Nuclear Atkins Assystem Alliance SNC1

N/A – membership interest

50%

(5)

Partnering Plus Limited

£1 ordinary share B

33%

(8)

TRANS4M Limited1

£1 ordinary share

25%

(9)

£1 ordinary share

30%

(10)

1

1

UK Nuclear Restoration Limited

1

33.333%

(1)

49%

(2)

N/A – membership interest

24.5%

(3)

N/A – membership interest

20%

(4)

1. Owned by a subsidiary undertaking other than WS Atkins plc.

WS Atkins plc Annual Report 2016

Financial Statements > Notes to the Financial Statements

195

STRATEGIC REPORT

Key to registered office/principal place of business (1) Woodcote Grove, Ashley Road, Epsom, Surrey, KT18 5BW, England & Wales (2) Office No: 21, 19th Floor, Al Ghaith Tower, Hamdan Street, PO Box 33538, Abu Dhabi, United Arab Emirates (3) 14900 Landmark Blvd, Suite 400, Dallas TX 75254, United States (4) 301 N Cascade Avenue, Montrose, CO 81401, United States (5) 70 Boulevard de Courcelles, 75017 Paris, France (6) PO Box 23443, Qatar (7) 100 Union Valley Road, Suite 101a, Oak Ridge TN 37830, United States (8) Northshore, North Shore Road, Stockton-On-Tees, Cleveland, TS18 2NB, England & Wales (9) 4th Floor, 130 Wilton Road, London, SW1V 1LQ, England & Wales (10) Booths Park, Chelford Road, Knutsford, Cheshire, WA16 8QZ, England & Wales c) Joint ventures The following entities are considered to be joint ventures based on the agreements in place between Atkins and the other parties:

AMA Nuclear Limited 1 Connect Plus Services (unincorporated)

1

DG21 LLC 1 DGM21 LLC

1

Engage S.N.C. 1 GET-NSA, LLC

1

Nuclear Atkins Assystem Alliance S.N.C. 1

Financial year end

Registered office

33.3%

31 December

(1)

32.5%

30 September

N/A

24.5%

31 December

(2)

20.0%

31 December

(3)

25.0%

31 December

(4)

49.0%

31 December

(5)

50.0%

31 December

(4)

GOVERNANCE

Proportion of ownership/interest

Name

Key to registered office (1) Woodcote Grove, Ashley Road, Epsom, Surrey, KT18 5BW, England & Wales (2) 14900 Landmark Blvd, Suite 400, Dallas TX 75254, United States (3) 301 N Cascade Avenue, Montrose, CO 81401, United States (4) 70 Boulevard de Courcelles, 75017 Paris, France (5) 100 Union Valley Road, Suite 101a, Oak Ridge TN 37830, United States d) Joint operations The Group also carries out contracts in joint arrangement with other contractors as our clients seek a single point of responsibility for major projects. The following are the principal joint operations in which the Group participated during the year: Principal place of business

Staffordshire Alliance

33.3%

UK

Atkins – TYPSA

50.0%

KSA

INVESTOR INFORMATION

Proportion of ownership/interest

Name

FINANCIAL STATEMENTS

1. Owned by a subsidiary undertaking other than WS Atkins plc.

WS Atkins plc Annual Report 2016

196

Five Year Summary Consolidated Income Statements for years ended 31 March

2016 £m

2015 £m

2014 £m

2013 £m

2012 £m

Revenue

1,861.9

1,756.6

1,750.1

1,705.2

1,711.1

Cost of sales

(1,109.2)

(1,049.2)

(1,065.0)

Gross profit Administrative expenses

(1,088.6)

(1,097.1)

752.7

707.4

685.1

616.6

614.0

(609.3)

(588.9)

(571.4)

(512.6)

(476.8)

Operating profit

143.4

118.5

113.7

104.0

137.2

Underlying operating profit

148.2

134.1

116.4

109.7

110.5

(3.1)

0.4

10.5

4.5

7.2

Net (loss)/profit on disposal of businesses, non-controlling interests and joint ventures Income from other investments

1.1

2.2

1.2

–

–

Share of post-tax profit from joint ventures

0.7

0.1

2.4

3.8

1.9

142.1

121.2

127.8

112.3

146.3

4.0

4.8

4.2

3.4

4.1

Profit before interest and tax Finance income Finance costs

(15.0)

(19.3)

(17.8)

(17.7)

(14.9)

Net finance costs

(11.0)

(14.5)

(13.6)

(14.3)

(10.8)

Profit before tax

131.1

106.7

114.2

98.0

135.5

Underlying profit before tax

139.0

121.9

106.4

99.2

101.6

Income tax expense

(27.7)

(21.0)

(17.9)

(13.7)

(28.7)

Profit for the year

103.4

85.7

202.7

183.5

208.4

103.2

85.7

96.0

84.6

106.7

Profit attributable to: Owners of the parent Non-controlling interests

0.3

(0.3)

0.1

103.4

0.2

85.7

–

96.3

84.3

106.8

106.0 p

87.8 p

98.4 p

86.8 p

109.0 p

Basic earnings per share – continuing operations – discontinued operations

–

–

–

106.0 p

–

87.8 p

98.4 p

86.8 p

109.0 p

–

103.0 p

85.4 p

95.8 p

84.7 p

106.6 p

Diluted earnings per share – continuing operations – discontinued operations

–

–

–

103.0 p

–

85.4 p

95.8 p

84.7 p

106.6 p

–

107.3 p

97.1 p

85.7 p

82.6 p

79.0 p

–

–

–

–

97.1 p

85.7 p

82.6 p

79.0 p

Underlying diluted earnings per share – continuing operations – discontinued operations

– 107.3 p

WS Atkins plc Annual Report 2016

Financial Statements > Five Year Summary

197

2013 £m

2012 £m

253.2 46.8 51.9 4.3 66.5 2.0 29.1 453.8

244.4 54.3 53.6 3.8 76.8 1.2 20.7 454.8

204.0 35.4 46.7 4.2 82.7 – 19.9 392.9

211.4 39.6 50.7 7.1 91.5 0.3 20.0 420.6

205.0 46.3 51.5 3.5 84.2 0.3 18.2 409.0

– 480.0 32.9 – 419.3 1.3 933.5 – 933.5

– 476.5 33.4 – 235.4 1.3 746.6 – 746.6

– 418.1 31.5 – 237.3 0.4 687.3 – 687.3

0.2 449.2 35.9 – 201.5 0.5 687.3 5.8 693.1

1.1 445.3 35.0 6.1 167.0 0.4 654.9 6.9 661.8

(7.0) (483.0) (0.5) (28.3) (1.1) (519.9) – (519.9) 413.6

(61.1) (510.8) (0.6) (40.2) (0.8) (613.5) – (613.5) 133.1

(55.3) (453.1) (2.7) (31.6) (0.8) (543.5) – (543.5) 143.8

(59.8) (486.7) (1.4) (40.5) (1.5) (589.9) (5.2) (595.1) 98.0

(105.7) (506.1) (1.7) (34.3) (3.6) (651.4) (0.1) (651.5) 10.3

(273.6) (2.8) (285.8) (1.0) (11.7) (3.2) (578.1)

(50.2) (2.6) (316.6) (0.2) (10.1) (3.2) (382.9)

(45.5) (3.3) (339.0) (1.7) (15.5) (1.5) (406.5)

(49.4) (4.4) (295.6) (1.3) (20.1) (1.5) (372.3)

(4.9) (6.8) (265.3) (2.5) (18.8) (1.6) (299.9)

Net assets

289.3

205.0

130.2

146.3

119.4

Capital and reserves Ordinary shares Share premium account Merger reserve Retained earnings Equity attributable to owners of the parent Non-controlling interests Total equity

0.5 62.4 8.9 217.2 289.0 0.3 289.3

0.5 62.4 8.9 133.0 204.8 0.2 205.0

0.5 62.4 8.9 58.2 130.0 0.2 130.2

0.5 62.4 8.9 74.7 146.5 (0.2) 146.3

0.5 62.4 8.9 47.5 119.3 0.1 119.4

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 Cash and cash equivalents Derivative financial instruments Assets of disposal group classified as held for sale

Liabilities Current liabilities Borrowings Trade and other payables Derivative financial instruments Current income tax liabilities Provisions for other liabilities and charges Liabilities of disposal group classified as held for sale Net current assets Non-current liabilities Borrowings Provisions for other liabilities and charges Post-employment benefit liabilities Derivative financial instruments Deferred income tax liabilities Other non-current liabilities

WS Atkins plc Annual Report 2016

GOVERNANCE

2014 £m

FINANCIAL STATEMENTS

2015 £m

INVESTOR INFORMATION

2016 £m

STRATEGIC REPORT

Consolidated Balance Sheets as at 31 March

198

Five Year Summary continued Consolidated Cash Flow Statements for the years ended 31 March 2016 £m

2015 £m

2014 £m

2013 £m

2012 £m

143.4

118.5

113.7

104.0

137.2

Cash generated from operations Operating profit for the year Other non-cash costs/(income) Depreciation charges Impairment of goodwill Amortisation and impairment of intangible assets Release of deferred income

0.1

4.8

(3.5)

4.5

(2.9)

18.2

16.3

14.7

14.6

17.1

– 11.9

2.8

–

13.0

7.5

14.0

–

9.5

–

–

–

–

(3.1)

(0.2)

9.4

8.6

6.7

6.5

6.4

Pension settlement and curtailment gain

(1.5)

–

–

(4.4)

(33.3)

(Profit)/loss on sale of property, plant and equipment

(6.7)

–

0.4

–

0.5

Loss on sale of intangible assets

–

0.1

0.1

–

–

Gain on disposal of available-for-sale financial assets

–

–

–

(0.8)

–

0.5

(0.7)

(1.8)

(4.7)

(5.7)

(26.4)

2.5

(10.3)

(26.7)

(34.0)

Share-based payment charge

Movement in provisions Movement in working capital Pension deficit funding

(32.8)

(32.0)

(32.0)

(21.0)

(26.0)

Cash generated from continuing operations

116.1

133.9

95.5

82.9

68.6

116.1

133.9

95.5

82.9

68.6

Cash flows from operating activities Cash generated from continuing operations Interest received

3.6

4.9

3.6

2.6

3.9

Interest paid

(3.9)

(4.8)

(5.6)

(3.2)

(2.5)

Income tax paid

(36.8)

(17.8)

(10.9)

(7.1)

(11.0)

Net cash generated from operating activities

79.0

116.2

82.6

75.2

59.0

Cash flows from investing activities

(14.1)

(75.2)

0.4

(5.4)

(35.9)

Net cash generated from/(used in) financing activities

115.5

(48.3)

(40.2)

(38.8)

22.5

Net increase/(decrease) in cash and cash equivalents

180.4

(7.3)

42.8

31.0

45.6

Cash, cash equivalents and bank overdrafts at beginning of year

235.4

237.3

201.5

167.0

121.5

Exchange movements

3.5

5.4

(7.0)

3.5

(0.1)

419.3

235.4

237.3

201.5

167.0

Financial assets at fair value through profit or loss

32.9

33.4

31.5

35.9

35.0

Loan notes receivable

20.1

21.8

20.3

20.0

25.1

Cash, cash equivalents and bank overdrafts at end of year

Available-for-sale financial assets Borrowings due no later than one year Borrowings due later than one year Finance leases Net funds

WS Atkins plc Annual Report 2016

–

–

–

–

6.1

(7.0)

(61.0)

(55.2)

(59.8)

(273.5)

(50.2)

(45.5)

(49.3)

(104.0) –

(0.1)

(0.1)

(0.1)

(5.3)

(6.6)

191.7

179.3

188.3

143.0

122.6

Investor information

199

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.

Richard Webster WS Atkins plc Woodcote Grove Ashley Road Epsom Surrey KT18 5BW England

For the issuance and management of ADRs, and any general ADR questions, please contact:

Financial calendar Ex-dividend date

7 July 2016

Record date

8 July 2016

Last day to elect for DRIP

20 July 2016

Annual General Meeting

2 August 2016

Final dividend payment date

19 August 2016

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 4TU UK Telephone: 0871 664 0300 if calling from the UK (calls cost 12p per minute plus your phone company’s access charge) or +44 371 664 0300 if calling from outside the UK (calls outside the UK will be charged at the applicable international rate). Lines are open 0900 to 1730 Monday to Friday, excluding public holidays in England and Wales. You can access and maintain your Atkins shareholding online through our share portal: www.myatkinsshares.com. Other shareholder enquiries should be addressed to Atkins’ company secretary at the registered office.

JPMorgan Chase Bank N.A. Depositary Receipts Group 4 New York Plaza Floor 12 New York NY1004 USA Investor helpline: 800-990-1135 if calling from the US (toll free) or +1-651-453-2128 if calling from outside the US. Website: www.adr.com Investor relations website Many commonly asked shareholders’ questions are addressed in the investor relations section of our website: www.atkinsglobal.com/investors.

GOVERNANCE

Company secretary and registered office

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 www.myatkinsshares.com. International payment service for dividends Capita Asset Services 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 20 8639 3405 if calling from outside the UK (calls will be charged at the applicable international rate) or 0871 664 0385 if calling from the UK (calls cost 12p per minute plus your phone company’s access charge). Lines are open 0900 to 1730 Monday to Friday excluding public holidays in England and Wales. Email: [email protected] or visit the registrar’s website: www.international.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 +44 371 664 0381 to request a mandate form and an explanatory booklet. Your completed mandate form must be received by the registrar no later than 20 July 2016 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.

WS Atkins plc Annual Report 2016

FINANCIAL STATEMENTS

Registered in England Company no. 1885586

INVESTOR INFORMATION

WS Atkins plc

STRATEGIC REPORT

Investor information

200

Investor information continued Unsolicited mail 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: www.mpsonline.org.uk or via telephone on 020 7291 3310. 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 1052686. Further information may be obtained on +44 (0)20 7930 3737 or from www.sharegift.org. 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 investor code 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 www.myatkinsshares.com • 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 www.myatkinsshares.com. 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. Share fraud warning Remember: if it sounds too good to be true, it probably is You should be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports.

WS Atkins plc Annual Report 2016

In recent years, many companies have become aware that their shareholders have received unsolicited telephone calls or correspondence concerning investment matters. These are typically from overseas based 'brokers' working in ‘boiler rooms’ who target UK shareholders, offering to sell them what often turn out to be worthless or high risk shares in US or UK investments. These brokers can be very persistent, extremely persuasive and use sophisticated means to approach and convince investors. The Financial Conduct Authority (FCA) has found that even experienced investors have been caught out by share fraud. It was also discovered that, on average, victims of boiler rooms lose an average of £20,000 to these scams, with as much as £200 million being lost in the UK each year. If you receive any unsolicited investment advice, you should follow the steps below: • avoid getting into a conversation, note the name of the person and firm contacting you and then end the call • check that they are properly authorised by the FCA before getting involved via its register: www.fca.org.uk/register or call 0800 111 6768 • search the list of unauthorised firms to avoid: www.fca.org.uk/scams • think about getting independent financial and professional advice before you hand over any money. Details of any share dealing facilities that the Company endorses will be included in Company mailings. Protecting your investment We strongly advise you to deal only with financial services firms that are authorised by the FCA. Keep in mind that authorised firms are unlikely to contact you out of the blue with an offer to buy or sell shares. If you deal with an unauthorised firm, you would not be eligible to receive payment under the Financial Services Compensation Scheme. For more information visit the FCA website: www.fca.org.uk/scams. Reporting a scam If you suspect you have been approached about an investment scam, contact the FCA using the share fraud reporting form: www.fca.org.uk/scams. You can also call the FCA Consumer Helpline on 0800 111 6768. Reporting unauthorised organisations who are targeting, or have targeted, UK investors, means the FCA can maintain an up to date list and appropriate action can be considered. If you have already paid money to share fraudsters you should contact Action Fraud, the UK’s national reporting centre for fraud and internet crime, on 0300 123 2040 or online at www.actionfraud.police.uk. The service is run by the City of London Police working alongside the National Fraud Intelligence Bureau.

201

Cautionary Statement ANNUAL REPORT 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 or 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 36 to 41). 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 14001. 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.

WS Atkins plc Annual Report 2016

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Annual Report 2016 WS Atkins plc

WS Atkins plc Annual Report 2016

WS Atkins plc Registered in England Company no. 1885586 WS Atkins plc Woodcote Grove Ashley Road Epsom Surrey KT18 5BW England