WATERMAN GROUP PLC Waterman Group plc, the engineering and environmental consultancy, today announces its Preliminary Results for the year ended 30 June 2015.
Highlights | 2015 | 2014*** | Change |
| £74.5m £9.4m £83.9m | £59.8m £9.0m £68.8m | +25% +4% +22% |
| £3.4m | £1.9m | +79% |
| £2.4m | £0.8m | +200% |
| £2.7m | £1.4m | +93% |
| 4.4p | 0.6p | +633% |
| 5.4p | 2.0p | +170% |
| 2.0p | 1.0p | +100% |
| £3.8m | £1.6m | +138% |
Solid order book of £130m (FY2014: £120m) driven by strong UK demand.
Staff numbers increased by 14% to 1,259 during the last twelve months to service the growth in the UK market.
Return on Capital Employed**(ROCE) increased to 30.3% (FY 2014: 11.4%), exceeding our published strategic target to achieve 20% by June 2016.
* Adjusted for amortisation of acquired intangible assets and exceptional items.
** Return on Capital Employed is calculated as adjusted operating profit divided by average capital employed where capital employed is equity less goodwill less net funds.
***Previously reported results exclude the effects of discontinued operations. Commenting on the results, Nick Taylor, Chief Executive said:-
' Waterman is in excellent shape. We are delighted with these results.'
' The Group operates in the property and infrastructure markets. Our niche position is helping us to develop further our reputation as the 'Go to Consultant' for both our clients and staff.'
' The past year has seen Waterman continue to deliver against our three year strategic plan to enhance shareholder value. Our profitability has improved significantly and we are proposing to double the dividend we are paying to our shareholders.'
' The strategy announced in 2013 to re-focus the Group primarily on the UK has been a significant success. As a result, during the last two years UK revenue has increased by 48%. Waterman now generates 89% of its revenue from the UK.'
' Overseas, our operations in Australia and Europe are performing well.'
' The Board is looking to the future with confidence. We expect to deliver further growth in the current year. Our future aspiration is to improve the Group adjusted operating margin towards 6% over the next four years from the current level of 3.3%.'
-ends-
Date: 5 October 2015 | ||
For further information please contact: | ||
Waterman Group plc | Broker Profile | N+1 Singer |
Nick Taylor, Chief Executive | Simon Courtenay | Sandy Fraser |
Alex Steele, Chief Finance Officer | Harry Rippon | 020-7496-3000 |
020-7928-7888 | 020-3763-3400 | |
web: www.watermangroup.com |
This is my first annual statement to Waterman shareholders since my appointment as Chairman.
I am very pleased to announce that Waterman is performing ahead of its three year strategic plan which runs to 30 June 2016. The Group is delivering a significant improvement in its financial performance and increased returns to our shareholders.
The success of this strategy is demonstrated by the continuing progression in the Group's adjusted profit before tax, which has increased substantially to £2.7m (2014: £1.4m, 2013: £1.1m).
The Group's continued focus on stable economic markets in the UK, Australia and Ireland has established firm foundations for the future. Waterman generated 89% (2014: 87%) of its revenue from the UK with revenue growing by a total of 48% over the last two years, including 25% in 2015 (2014: 19%).
Waterman's premium brand and its long established client relationships have contributed to the delivery of strong results, with an improved cash flow and a further increase in our Return on Capital Employed. Positively, net funds have improved by £2.2m to £3.8m (2014: £1.6m). This was after investing £0.8m in April 2015 to increase the Group's ownership of its Australian businesses. Most encouragingly, the Group's Return on Capital Employed hit 30.3% (2014: 11.4%, 2013: 7.6%) which is ahead of our previously stated target of achieving a 20% Return on Capital Employed by June 2016.
As a result of the improved performance noted above and the outlook for the Group, the Board is pleased to recommend to shareholders a significant increase in the dividend. We have proposed a final dividend of 1.2p (2014: 0.6p) making a total dividend for the year of 2.0p (2014: 1.0p), an increase of 100% on last year.
Waterman is now experiencing the benefits from the strategic decisions taken in earlier years to return focus to the UK and to simplify its management structure. The result is a more focused business that is operating in buoyant markets. Over the last three years, Waterman has withdrawn from China, UAE and Russia as these were markets which the Board decided could not provide adequate sustainable returns. The one-time financial impact of these decisions has been fully recognised in previous years.
Revenue grew by 22% to £83.9m (2014: £68.8m). The Group now generates 89% of its revenue from the UK and 11% from its overseas operations, with 8% from Australia and 3% from Ireland and Poland.
We have continued to recruit engineers and environmental consultants in order to provide the necessary resource to service our clients' increasing workload. Staff numbers grew by 151 (14%) during the year to 1,259 employees (2014: 1,108). Our staff is the key resource for the Group's future success and we need to continue to nurture our talent and improve and expand their career prospects, especially given the Board's plans for future growth. I am delighted with the strong culture that the Group has developed that enables us to attract and retain high quality staff.
Investment in many of our offices has been made to improve the working environment and to provide greater capacity for future expansion. City centre locations for our design teams give greater connectivity with our clients and other professional colleagues; over the last twelve months we have relocated into city centre offices in Birmingham, Leeds and Sydney.
Management actions to improve the performance of our UK Civil and Transportation Consulting business have shown good results. Although revenue in the period fell from £13.3m to £11.8m, operating losses were reduced by £1.7m to £1.2m this year from £2.9m in 2014. This year's performance continued to be adversely impacted by low staff utilisation and legacy issues on historic projects, which were substantially resolved by the period end.
Looking ahead, our UK Civil and Transportation's business should benefit from both improved market conditions and our stronger position in Public sector frameworks. The Board fully recognises the importance of this business returning to profitability in the future.
New commissions have resulted in an increased order book which has grown by 8% to £130m (2014:
£120m). This growth has been generated through our leading position in the UK Property and Highways sectors where demand for our quality services is increasing. Over the last year we have won several important long term frameworks in the Public sector.
Following the outcome of the recent General Election our Property clients have focused on their future direction and investment strategies for the UK. This should provide enhanced opportunities for Waterman, further improved by its Highways and Transportation Outsourcing business where revenue grew by 36% to £19.8m (2014: £14.6m).
Our Australian businesses are based in Melbourne and Sydney, where our teams primarily provide building services consultancy advice to the healthcare, education, residential, technology and financial markets. The original stakes in Sydney and Melbourne were acquired in 2002 and 2006 respectively.
Over the last two years these businesses have been through a period of planned transition which has seen the appointment of the next generation of Directors in both Melbourne and Sydney. This process has enabled us to build on the established positions of each operation and develop a strategy to create a stronger Waterman Australia.
As previously announced, on 1 April 2015, the Group invested AUD 1.6 million (equivalent to approximately £0.82 million at 1.94 AUD: GBP) before transaction costs to increase its ownership of the Sydney business to 100% (previously: 80%) and of the Melbourne business to 51% (previously: 41%). The purchase was funded by a four year AUD 1.6 million term loan from HSBC Bank plc. Interest on the loan will be charged at 2.5% per annum over AUD LIBOR. Further information is included in note 12 of this preliminary report.
A new incentive scheme for senior management was approved by shareholders at the Annual General Meeting in December 2014. This Long Term Incentive Plan (LTIP) provides senior management with an award of shares which vest in part when the share price, which was 52 pence at the time of shareholder approval, achieves certain trigger values above 100 pence for a period of 25 consecutive dealing days during the five year period from 9 December 2014. The LTIP share awards will vest in full if the share price achieves the trigger value of 150 pence for a period of 25 consecutive dealing days.
Full details of the LTIP scheme were included in the Chairman's letter to shareholders issued prior to the Annual General Meeting held on 5 December 2014. Further information is included in note 19 of this preliminary report.
In line with the Group's strategy to increase shareholder returns, the Board is recommending a significant increase in the dividend. This year we are proposing a doubling of the dividend we are paying to our shareholders.
The Board is proposing to pay a final dividend of 1.2p per share (2014: 0.6p). Subject to approval by the shareholders at the Annual General Meeting, the final dividend will be payable on 8 January 2016 to shareholders on the register on 11 December 2015. The final dividend together with the interim dividend of 0.8p paid on 17 April 2015 makes a total dividend for the year of 2.0p (2014: 1.0p), an increase of 100%. The full year dividend is covered 2.7 times by adjusted earnings per share.
Over the last two years, the Board has delivered a doubling of dividends year on year (2013: 0.5p, 2014 1.0p, 2015: 2.0p), reflecting its confidence in the strategy, financial performance and future prospects of the Group.
Roger Fidgen retired at the end of the Annual General Meeting on 5 December 2014 after ten years on the Board, including nine years as Chairman.
The Board thanks Roger for his guidance and leadership to the Group throughout his tenure, especially during the difficult times of the recent recession, and wishes him a long and happy retirement.
Following Roger's retirement I was appointed to the Board as non-executive Director and Chairman.
As reported at the time of my appointment, I am a Chartered Surveyor with over 40 years' experience in the London property market across several economic cycles. I was previously Chief Executive of Baker Harris Saunders Plc, which was the first surveying firm to float on the London Stock Exchange. I have been Chairman of several committees of the Royal Institution of Chartered Surveyors and also the Master of the Chartered Surveyors Livery Company.
Since my appointment I have spent time in getting to know many of our directors and staff and understanding how the various elements of the business work together to maintain and improve our position as a niche consultant. I am greatly encouraged by what I have seen and I congratulate our staff and colleagues for delivering a successful year.
The Board has recently completed a review of the Group's progress against the previously published three year strategic target to triple adjusted annual profits before tax to £3.3m over the three year period to 30 June 2016, with a Return on Capital Employed (ROCE) of 20%. Given the recent strong performance, the Board now expects the Group to exceed the profit target during this financial year and we have already exceeded our ROCE target, a year early.
Waterman will continue to focus on the core markets in the UK, Australia and Ireland where clients and revenue are more secure and we see plentiful opportunity. Two important initiatives have begun that will ensure our clients are fully aware of the full range of services we offer throughout the Group and to increase our share of Public sector opportunities.
The availability of skilled resources is a constraining factor. Accordingly, our strategy is not to drive the maximum revenue growth, but rather it is to improve Group profitability through our long term relationships in the markets in which we operate and to become the 'Go to Consultant' for our clients and employees.
It is in this context that the Board has created an aspiration for the four years to June 2019, to increase the Group's adjusted operating profit margin towards 6% from the current level of 3.3%. We anticipate that this aspiration will drive a continued improvement in our financial performance and will enable us to continue to create significant value for our shareholders.
In conclusion, the Group is in excellent shape and accordingly, the Board looks forward to the current year with excitement and confidence.
GROUP OVERVIEW
The Group has made excellent progress with our strategy to have a greater focus on the UK where 89% of our revenue is now generated.
We have experienced outstanding growth in our UK Structures and Building Services property businesses and also in our Highways and Transportation Outsourcing business. Overall, our UK operations grew by 25%, significantly ahead of the published 7% growth in output of the UK construction industry in 2014. This success has been generated through our niche position in several markets and our ability to cross sell our services. Our clients remain very loyal and we have increased our share of their workload and opportunities.
In Australia we continue to deliver a consistent financial performance, even though the slowdown of China's growth has impacted on the local economy. Our office in Dublin has reported improving trading conditions as the requirement for new office space and residential properties increases.
Whilst fee levels currently remain competitive, there are some signs of improvement particularly in the Highways and in the private development sectors. During the year we have recruited an additional 151 staff, an increase of 14%. This recruitment has impacted on our operational costs and margins in several of our businesses as it has proved necessary to recruit through agencies involving one off recruitment fees. However, we are not anticipating that revenue and demand for our services in future years will continue to grow at over 20% per annum which has been the average over the last two years. Our investment in resources should benefit future profitability following the initial recruitment cost outlay.
The majority of our revenue is generated from London based clients, comprising major development companies, banks, pension and property investment funds. As previously anticipated, we are experiencing an increase in retail sector activity, with 160,000 m2of development designed by Waterman currently under construction on sites in Leeds, Newport and Oxford.
Following actions taken, the performance of our Civil and Transportation Consultancy business has improved, with the underlying performance moving towards a profit in the future.
Overall, the Group is expecting to exceed the previously published financial target to triple the adjusted profits before tax of £1.1m for FY 2013 during the three years to 30 June 2016.
PROPERTY SEGMENT OVERVIEW
Key financial performance indicators | 2015 | 2014 |
Revenue Operating profit * Operating margin | £42.1m £ 2.6m 6.2% | £32.6m £ 3.1m 9.5% |
*Operating profit is stated before exceptional items and amortisation of acquired intangibles.
The Property segment encompasses the UK Structures and Building Services businesses which are involved in development projects both in the public and private sectors. In addition, this segment includes our overseas business in Australia (which is partly owned by the Group), Ireland and Poland which are solely involved in the engineering design of buildings.
Revenue for this segment has increased by 29% to £42.1m, with the majority of this growth in the UK. The operating profit and margin has reduced during the year as we have needed to invest in the recruitment of additional technical resources to service our greater workload and salary costs have been increased in line with market conditions.
All our markets remain strong and we are currently utilising our staff in Ireland, Poland and Australia to service some work in the UK. We also operate an outsourcing office in India which solely provides draughting services for our UK structures team.
Key financial performance indicators | 2015 | 2014 |
Revenue Operating profit* Operating margin | £20.9m £ 1.1m 5.3% | £15.4m £ 1.5m 9.7% |
*Operating profit is stated before exceptional items and amortisation of acquired intangibles.
Waterman's Structures business has expanded during the year with revenue increasing by 36% to
£20.9m. It has been necessary to increase our headcount during the period to meet our clients' requirements and this has resulted in additional costs being incurred for one off agency recruitment fees which has reduced the operating profit and margins. The enhanced capacity within the structures team will be available to service our increasing workload and therefore the investment in staff will lead to higher margins in the future years.
Waterman continues to win awards for the structural design of buildings in all markets such as offices, retail and residential. One of our residential projects, NEO Bankside situated next to the Tate Modern Gallery in London, has recently been shortlisted for the prestigious Royal Institute of British Architects 2015 Stirling prize.
Key financial performance indicators | 2015 | 2014 |
Revenue Operating profit* Operating margin | £11.8m £ 0.5m 4.2% | £8.1m £0.6m 7.4% |
*Operating profit is stated before exceptional items and amortisation of acquired intangibles.
The Group strategy is to target significant growth in our Building Services group over the next four years. Potential clients requiring building services consultancy advice are synonymous with our structural clients and we will aim to leverage these established relationships to cross sell our services, either as a single commission or part of a multidiscipline appointment.
This engineering segment is an area of investment and opportunity for Waterman and we are currently focusing on building a team capable of delivering design excellence for our clients.
In October 2014, the Everyman Theatre in Liverpool won the Royal Institute of British Architects Stirling prize for the ingenious use of natural ventilation to provide cooling to the theatre. This innovative design by Waterman involved the development of sophisticated computerised thermal modelling to predict the future temperatures within the auditorium, thereby enabling the building services design to be finalised.
UK MARKET REVIEWTenant demand continues to drive forward commercial development, particularly in the City of London where projects have provided a high proportion of our revenue this year. We are also experiencing increased demand for our services in regional cities such as Birmingham and Manchester, where developments are moving forward to tender and construction.
Waterman provided multidisciplinary services on the Land Securities development at 1 and 2 New Ludgate in London, which comprises 35,000m2of grade A office space located above retail units at ground floor level. Following the successful completion of this project, Waterman has been retained by Land Securities on 1 New Street Square, London which is a 27,000m2development pre-let to Deloitte.
An unusual commission which is progressing on site, is Angel Court in London developed by Mitsui Fudosan UK and Stanhope. This 27,000 m2project has involved the retention of significant parts of the existing core structure which is enclosed with a new steel superstructure incorporating an efficient building services system.
Our Building Services team have been appointed by Generali to provide consultancy services on 10 Fenchurch Avenue which is a 46,000m2mixed use office development located in the centre of London's insurance district. The 17 storey building has been designed by Waterman to have an energy efficient façade to reduce solar gain while maximising useful daylight.
In Birmingham, Waterman has recently been appointed by Legal and General on their 15,000m2
Temple Court development.
Demand for prime and super prime residential in London shows little signs of slowing and our teams of structural and building services engineers are busy delivering a variety of projects.
The Clarges development by British Land opposite the Ritz Hotel in London where Waterman is providing a multidiscipline service, includes a new headquarters for the Kennel Club of Great Britain. This 18,000m2residential project provides 34 apartments arranged over ten floors, ranging in size from one to five bedrooms.
Two Fifty One, formally known as Eileen House, is located at Elephant & Castle in London. This whole district is undergoing an extensive redevelopment and Waterman originally provided environmental planning advice on the regeneration of the area. Two Fifty One is a 41 storey residential tower designed by Waterman in conjunction with Laing O'Rourke using their DfMA prefabricated system for the structure and building services systems.
Another project under construction is Tribeca Square at Elephant & Castle, London which comprises 40,000 m2of high quality residential homes for developers Delancey and Oakmayne.
Waterman is appointed to provide structural engineering design services to Barratt London on the redevelopment of the Sainsbury Nine Elms site. On completion, this site will deliver over 700 new residential units in the Vauxhall area of London.
Recent completions include Buildings P1 and T1 for Argent at Kings Cross which provide over 300 luxury apartments.
Several of our clients' town centre retail led developments designed by W aterman have progressed onto the construction phase. Waterman is currently providing advice on over 600,000m2of future retail development, of which over 160,000m2is currently on site.
Large retail developments can often take many years to proceed through planning to completion and these projects provide great opportunities for Waterman to provide consultancy services at all stages. We are currently moving into a period where retail commissions will be providing an increasing proportion of the Group's revenue. Waterman has an extensive track record over many years of successfully delivering large schemes such as Bluewater, Bullring, Liverpool One and Westfield London and this has enabled us to secure commissions on the next series of large retail centres moving through the planning system such as Brent Cross in London and Whitgift Centre in Croydon.
Projects designed by Waterman include Friars Walk, Newport, a 38,000m2retail led town centre development for Queensbury Real Estate which is opening in the autumn of 2015. The 42,000 m2first phase of Victoria Gate in Leeds commenced on site in 2014 and involves the construction of a John Lewis store and retail units. Waterman has been involved with this project for over ten years providing planning and pre-construction services to the developer, Hammerson, for the comprehensive 100,000m2development. We are currently providing detailed design services for structures and building services to Sir Robert McAlpine who are appointed for the construction of the first phase of the project with completion in 2016.
The third development designed by Waterman, which has recently commenced on site, is the 80,000m2extension to the Westgate Centre in Oxford for Land Securities and The Crown Estate. This project is due for completion in autumn 2017 and is anchored by a 14,000m2John Lewis store with retail and leisure units along a mall leading onto the existing shopping centre, which is also being refurbished.
In London, the West End continues to reinvent itself and Waterman has provided consultancy services to The Crown Estate on their many historic projects in Regent Street. The latest development is St. James Market which provides 31,000m2of mixed use retail and commercial space in two significant buildings between Haymarket and Lower Regent Street.
Waterman are providing building services designs to Reignwood Group on the redevelopment of Ten Trinity Square in London. The original building constructed in 1922 was previously the Headquarters of the Port of London Authority, is Grade II* listed and overlooks the Tower of London World Heritage site. The building is being retained and sympathetically transformed into a luxury Four Seasons hotel with
100 guest rooms and suites. At the upper levels, 41 fully serviced luxury apartments are being incorporated into the development. The complex routing and access requirements of the building's services has been carefully considered by Waterman to limit damage to any of the heritage areas and particularly the ceilings.
Waterman has been appointed by the British Museum to carry out a full energy review of their prestigious Bloomsbury site which extends over 75,000m2and is visited by over 6 million people a year. This review will evaluate and propose means of significantly reducing the carbon emissions from the buildings.
Education has remained a major sector for our regional offices with commissions for primary and secondary schools plus further and higher education schools.
As part of the Education Funding Agency Priority School Building Programme, Waterman has been appointed as designers for the Harris Academy for 1,150 students and the Stratford Academy for 1,500 students in London.
Waterman is currently designing the Holywell primary and secondary school as part of the North Wales Schools Framework. Construction is progressing and the schools are programmed for delivery in the summer of 2016.
In the North West we have been appointed to provide detailed design of six schools within the Priority Schools Building Programme North West Batch. These schools are of significant importance as they represent the first series of schools designed to the new Education Funding Agency design guidelines.
There is a greater emphasis on computer simulation based design techniques and strict energy targets for all aspects of the building energy use.
Waterman's regional involvement in industrial projects is increasing. We are currently providing design advice to Rolls Royce on their jet engine casing production facility in Hucknall, Nottinghamshire and Siemens have appointed Waterman to design their new wind turbine factory in Hull.
In the Midlands at Nuneaton, we continue to provide multidisciplinary consultancy services on the Motor Industry Research Association (MIRA) complex. The redevelopment of this site will provide the perfect location for the European research and development of motor vehicles and associated components. It is expected that development will be phased over the next ten years.
As part of the ongoing framework with the Manufacturing Technology Centre (MTC), Waterman have designed a third technology building for our client at Ansty Park, Coventry. This advanced Manufacturing Technology Centre will showcase the cutting edge of British technology and will provide teaching facilities for research and development engineering.
Waterman has been appointed by Vinci UK to provide multidisciplinary design services for the construction of Allerton Waste Recovery Park. This project is a 13,500m2multi-treatment development on 5.1 hectares of land in North Yorkshire comprising an energy from waste facility, a mechanical treatment facility and an aerobic digestion unit. The park will produce 220,000 MWh of renewable electricity per annum and is due for completion and operation in 2018.
Key financial performance indicators | 2015 | 2014 |
Revenue Operating profit* Operating margin | £6.6m £1.0m 15.2% | £6.9m £0.9m 13.0% |
Operating profit due to non-controlling Interests Operating profit due to Waterman shareholders | £0.5m £0.5m | £0.5m £0.4m |
*Operating profit is stated before exceptional items and amortisation of acquired intangibles.
In Australia, we have businesses in Melbourne and Sydney. In April 2015, we increased our ownership of the Melbourne business to 51% (previously 41%) and the Sydney business to 100% (previously 80%).
Our Australian operation primarily provides building services consultancy advice to the public and private sectors where demand has remained constant and resilient, notwithstanding the slowdown of China and their reduced requirement for mineral resources from Australia. The majority of our revenue is generated from healthcare, education, prisons, residential, technology and bank fit out markets where demand remains high.
Whilst revenue in Australia has slightly reduced over the year, operating profit has increased with margins at a healthy 15.2% (2014: 13.0%). This performance reflects the business's niche position in several key markets.
AUSTRALIA MARKET REVIEWJustice, healthcare, residential, sports and recreational markets have continued to provide a base workload for the Melbourne office.
During the year Waterman has designed and documented the AUD 130m Royal Victorian Eye and Ear Hospital and the Monash Children's Hospital with a construction value of AUD 260m. We have recently been appointed designers for the AUD 200m Sunshine Hospital Women's and Children's Centre and this will generate fee income over the next two years. Another appointment is the Technical Advisory role on the AUD 100m expansion of Casey Hospital in Victoria.
In the sports and recreation market, we have completed the design of the Eltham Leisure Centre and Aquanation Aquatic Centre in Ringwood. We are currently designers for Franksten Stadium and Bendigo Stadium.
We have completed building services designs for the new AUD 40m Robert Bosch Headquarters on the Clayton Campus in Melbourne.
New appointments include a Technical Advisory role at St. James Cook University in Cairns and building services designs for a AUD 150m residential development in St. Kilda Road which is near our offices in Melbourne.
Waterman's Sydney operation is mainly focused on the residential, education, bank fit out and telecommunications markets where demand remains strong.
We have been appointed to provide building services design on the AUD 100m Northpoint retail and hotel development in North Sydney where our client wishes to utilise our 3D design and draughting capability on this exciting project.
In the residential market, Airlie Beach resort development providing 101 apartments in Queensland has recommenced and Waterman is appointed for both the building services and structural design.
Universities have continued to generate revenue as they expand their campuses to attract and accommodate overseas students. Waterman is currently working on projects at UTS, Sydney University, University of New South Wales, Wollongong University and Macquarie University.
The financial services sector is experiencing a roll out of upgrades in the retail outlets of many high street banks. Waterman has been appointed to provide building services designs for the upgrades for Commonwealth Bank, Westpac Bank and St. George Bank across Australia. These are ongoing commissions and we have completed one hundred branches to date with an additional three hundred branch refurbishments expected to continue to generate revenue over the next three years.
We relocated our offices from the outskirts of Sydney into a more central City location in February 2015. The new office provides better connections with our clients, thereby reducing travel time. In addition, we are aiming to recruit additional staff to service the increasing workload and the City centre location provides a greater access to the available resource pool in Sydney.
Key financial performance indicators | 2015 | 2014 |
Revenue Operating profit* Operating margin | £2.8m £48k 1.7% | £2.1m £1k 0% |
*Operating profit is stated before exceptional items and amortisation of acquired intangibles.
Waterman's European operations, which are based in Ireland and Poland, have experienced strong growth in the last year, with revenue up 33% to £2.8m. The business has now returned to profitability after a number of very challenging years.
The Irish economy recorded the strongest growth figures in the Eurozone in 2014. Investment in commercial property in Dublin has increased significantly, as the effect of the stagnation of the last six years has resulted in a shortage of high quality office space. The residential sector is also growing with a drive towards properties for lease rather than traditional housing for sale. Retail, hotel, industrial and logistics sectors are expected to become more active in the future.
The property sector in Poland remains more subdued, though with some signs of increasing investment. Our Warsaw team has continued to provide technical support on London and Dublin projects.
Our Dublin office has seen considerable growth in its residential workload in the year as projects start to move from planning stage to construction. New commissions secured include the 200 unit Marrsfield apartment scheme and projects at Waterside Swords, Station Road Portmarnock, Oldcourt in Firhouse and at Kilternan. Planning for Phase 3 of the Clancy Quay development has also commenced. Construction is now underway at Royal Canal Park for Ballymore, Oldtown and Clongriffin for Gannon and at Clancy Quay (Phase 2) and Central Park for Kennedy Wilson.
Waterman has been appointed by Green REIT to provide structural design services for an eight storey 13,000m2office scheme at Central Park, and by state agency IDA Ireland, for an office development at Tralee Technology Park, County Kerry. Construction of a major refurbishment and extension to Baggot Court in Dublin has commenced and will provide 18,000m2of Grade A office space on completion. Planning stage services have also been completed for 35,000m2of new development as part of the Capital Dock scheme.
The retail sector remains more subdued, although there are signs of activity levels starting to pick up. Planning stage services have been provided for a major upgrade to Stillorgan Shopping Centre, where Waterman are appointed to provide structural and building services engineering. Construction of Aldi's Terenure store in Dublin, which incorporated elements of a historic tram terminus building, has recently been completed and is due to open for business in autumn 2015. We have subsequently been appointed for the design of several new Aldi stores.
Waterman continues to be one of the leading consultancies in the education sector in Ireland. Several significant new commissions have been secured, including the thirty two classroom Harcourt Urban primary school, which is to be developed as an exemplar project for the Irish Department of Education, a six hundred pupil secondary school at Clifden, County Galway, and the Rapid Build Schools Framework for 2015. For this latter appointment, Waterman has already provided all civil and structural work required to obtain planning and to procure design and build contractors for new schools at thirteen sites. Detailed design has commenced for the one thousand pupil Kingswood exemplar secondary school, South Dublin, while construction of several primary school projects has been completed in the year.
We have successfully strengthened our teams through recruitment of additional senior and support staff. Our building services team, only established in 2014, has made better than expected progress and an increasing number of projects are now being awarded on a multi-discipline basis. As a result Waterman is well positioned to benefit from the continued recovery in the Irish economy.
In Warsaw, the Waterman team has completed a number of fit-out commissions for tenants of the Pramerica Tower in Krakow, following completion of refurbishment work at the building in early 2015. Structural design work for a 34,000m2office in Domaniewska, Warsaw, has also been completed, with construction due to commence in the coming months.
Waterman has been appointed to provide multi-discipline engineering services for Palace Park, a new leisure and residential community development south of Warsaw and feasibility work for a retail refurbishment and extension scheme at Zielona Gora.
INFRASTRUCTURE & ENVIRONMENT SEGMENT OVERVIEW
Key financial performance indicators | 2015 | 2014 |
Revenue Operating profit/(loss)* Operating margin | £41.8m £ 0.2m 0.5% | £36.3m (£ 1.6m) (4.4%) |
*Operating profit/(loss) is stated before exceptional items and amortisation of acquired intangibles.
The Infrastructure & Environment segment comprises Waterman's Civil and Transportation Consulting, Highways and Transportation Outsourcing and Environmental Consulting businesses.
Overall performance has resulted in an operating profit of £0.2m being delivered this year compared to 2014's operating loss of £1.6m. Revenue has increased by 15% to £41.8m, primarily from the growth of our Highways and Transportation Outsourcing business which has experienced a continuing strong demand for our services.
The actions taken in 2014 to restructure the management of our Civil and Transportation Consulting business and to reduce costs and increase utilisation has very significantly reduced the losses in this business to £1.2m from £2.9m in the previous year. The current year loss in this business is in part due to one off provisions on legacy projects, with the underlying performance moving towards a profit in the future.
Several senior recruits have been made to focus on public sector frameworks and transportation planning and therefore we anticipate that these sectors will generate additional revenue in the near future.
Key financial performance indicators | 2015 | 2014 |
Revenue Operating (loss)* Operating margin | £11.8m (£ 1.2m) (10.2%) | £13.3m (£ 2.9m) (21.8%) |
*Operating (loss) is stated before exceptional items and amortisation of acquired intangibles.
Revenue reduced by 11% to £11.8m and operating losses have reduced by £1.7m to £1.2m. Included in this loss are legacy issues from historic projects which have been protracted and a one off provision of £0.5m on two projects where final account settlements have been reached with our clients.
Following the restructuring of the Civil and Transportation Consulting business in 2014, significant improvements in the underlying performance have been achieved. The business has now been streamlined and the forward order book continues to improve giving confidence that it remains on course to deliver the Board's strategic objective in its return to profitability.
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