92
WS Atkins plc Annual Report 2004

WS Atkins plc Annual Report 2004/media/Files/A/...WS Atkins plc Annual Report 2004 Annual Report 2004. Contents 01 Financial summary and Business overview ... covering technical, logistical,

  • Upload
    others

  • View
    16

  • Download
    1

Embed Size (px)

Citation preview

WS Atkins plcWoodcote GroveAshley RoadEpsomSurrey KT18 5BWEngland

Telephone +44 (0)1372 726140Fax +44 (0)1372 740055

[email protected]

WS Atkins plcAnnual Report 2004

Annual Report 2004

Contents01 Financial summary and Business overview02 Case studies14 Chairman’s statement16 Chief Executive’s review of operations24 Financial review28 Board of Directors30 Directors’ report32 Corporate governance report36 Remuneration report42 Auditors’ report

43 Consolidated profit and loss account44 Consolidated balance sheet45 Consolidated cash flow statement46 Consolidated statement of total

recognised gains and losses46 Reconciliation of movements

in Group shareholders’ funds47 Parent company balance sheet48 Notes to the financial statements83 Five year summary87 Investors’ information

Atkins is a leading provider of professional services. We are the largest engineering consultancy in the UK, the largestmulti-disciplinary consultancy in Europe and the eighth largestdesign team in the world.(1)

Our staff include engineers, architects, surveyors, cost andproject managers, planners, management consultants,geologists and experts in information technology,telecommunications and environmental management.

The majority of our work is focused on the efficient operationof our clients’ capital programmes. We:

Plan all aspects of our clients’ projects, conducting studiescovering technical, logistical, legal, environmental andfinancial considerations.

Design systems, processes, buildings and civil structures. Wedevelop cutting edge solutions and combine them with triedand tested technologies to achieve an optimal result.

Enable complex programmes, delivering one-off projects and managing ongoing processes to reduce timescales, costand disruption, allowing our clients to focus on their core operations.(1) New Civil Engineer – Consultants File 2003; Swedish Federation of Consultant Engineers & Architects – 2003; Engineering News-Record – 2003.

This report has been printed by Royle Corporate Print. Under the framework of ISO 14001, a structured approach is taken to measure, improve and audit their environmental status on an ongoing basis.

The material used in this Report is Revive Silk, manufactured by a paper mill with ISO 14001 accreditation. The material is fully recyclable and biodegradable and meets the National Association of Paper Merchants (NAPM) recycling standards.

Revive Silk is made from a minimum of 75% post-consumer waste. The remaining 25% being mill broke virgin fibres. The virgin fibre is totally chlorine free.

Designed by College Design.

Fully recyclable andbiodegradable

NAPM approvedrecycled product

Wood fibre fromsustainable forests

Totally Chlorine Free

ISO 14001Produced at a mill that holds ISO 14001 certification

01WS Atkins plc Annual Report 2004

Financial summary

Transport

Turnover (1) £410.3mTrading operating profit £23.5m

of turnover (1)

We are one of the largestproviders of design andtechnical support to the UK’sroad and rail sector. Oursignificant specialist expertiseand experience have enabled us to become the largest single consultant in theenhancement of the UK’s transport infrastructure.

43%

Design & EngineeringSolutions

Turnover (1) £264.3mTrading operating profit £13.4m

of turnover (1)

Our multi-discipline team drawson the expertise of architects,planners and engineers, as wellas environmental consultantsand other specialists to provide ‘clever’ design andengineering solutions.

28%

Management & ProjectServices

Turnover (1) £209.0mTrading operating profit £3.6m

of turnover (1)

We support the developmentand ongoing operation of ourclients’ assets, providing avariety of services including costplanning for life cycle and newbuild, IT implementation andfacilities management.

22%

Equity Investments

Turnover (1) £66.8mTrading operating profit £5.9m

of turnover (1)

7%

Business overview

MetronetAs well as providing significant design and engineering services to Metronet, the Group is a 20% stakeholder in theMetronet consortium which runs theinfrastructure for over two thirds of theLondon Underground network.

Equity ManagementEquity Management manages the Group’sequity investments in privately financedprojects, including those under the PrivateFinance Initiative (PFI) and Public PrivatePartnerships (PPP).

Lambert Smith Hampton LSH is a wholly owned subsidiary company run as a stand alone brand inthe commercial property market.

UK 11,325

Middle East 589

Asia Pacific 671

staff in offices around the globe

13,691 North America 453

Other Europe 653

Turnover(1)

Year ended March 2004 £950.4mYear ended March 2003 £833.7m

Adjusted profit before tax(2)

Year ended March 2004 £56.2mYear ended March 2003 £18.7m

Profit/(loss) before tax

Year ended March 2004 £62.0mYear ended March 2003(3) £(45.3)m

Net funds/(debt) (4)

Year ended March 2004 £68.4mYear ended March 2003 £(71.9)m

Dividend per share

Year ended March 2004 9.0pYear ended March 2003 3.0p

Staff

(1) Turnover from continuing operations excluding Joint Ventures.(2) Adjusted profit before tax, which the Directors consider is a fairer reflection

of the ongoing performance of the Group, is defined as profit beforeMetronet bid costs, the Colchester Garrison dilution gain, amortisation of pension fund deficit/(surplus), amortisation of goodwill, exceptional itemsand Employee Benefit Trusts. This includes share of Joint Ventures profitbefore tax of £20.6m (2003: £6.7m). A reconciliation of Adjusted profitbefore tax to Profit before tax is provided in the Financial review on page 24.

(3) 2003 figures have been restated for UITF 38 (Accounting for ESOP Trusts)and UITF 17, as amended (Employee Share Schemes).

(4) Net funds/(debt) excludes cash held by the Employee Benefit Trusts and cash held on behalf of subcontractors.

WS Atkins plc Annual Report 200402

M25 widening and access to Heathrow Terminal 5Atkins is Agent to the Highways Agency and Heathrow Airport Ltdfor the widening of the M25 between Junctions 12 and 15 and for the provision of a free flow spur road to Heathrow Airport’s new Terminal 5.

PlanAtkins prepared plans to create road access to the new terminal in conjunction with the road widening work. Integrated teams ofplanners, engineers and environmental scientists investigated theimpacts on traffic flow, the economy and the environment ofnumerous scenarios, consulting with key stakeholders includinglocal authorities, environmental bodies and the public. Atkinspresented the access case at the four-year Planning Inquiry thatbegan in 1995.

DesignThe access road was particularly challenging in both environmentaland engineering terms. The design solutions factored in single pointdecision-making by drivers, avoidance of rivers and environmentallysensitive land, and minimisation and recycling of excavated waste.Crucially we developed a design that could be constructed without loss of essential motorway capacity during the two-yearworks programme.

EnableThe Atkins team is carrying out Employer’s Agent duties on the site throughout 2004 and 2005. At the procurement stage, wedeveloped an innovative tendering approach to ensure overall bestvalue solutions rather than merely lowest face value cost. We arenow working closely with both clients and contractors, focusingheavily on the safety and convenience of the travelling public. Toensure maximum capacity during the works programme and to keeptraffic moving, the contractor is required to maintain four lanes openthrough peak periods, and to provide 24hour CCTV surveillanceand state-of-the-art incident clearance. In advance of the works, a public video was issued to Channel crossing operators and shownat motorway service areas to help motorists plan their journeys.

belowWe used virtual reality techniques tounderstand the experience of drivingalong the access road and ensure driverswould not be distracted by aircraft usingthe new terminal.

WS Atkins plc Annual Report 2004 03

“Atkins’ positive approach hascontributed significantly to theongoing success of the project.”– Terry Williams (Highways Agency).

“We have an excellentrelationship with theAtkins team.”– Tony Power (BAA plc).

aboveThe spur road was specially designed tominimise the severance effect on theColne Valley. Extra height and span andminimum column supports will improvethrough views.

“Managing major civilengineering works onthe busiest motorway inEurope is a hugechallenge. An excellentstart has been made tothe construction andduring the first fivemonths over 25 millionjourneys have beencompleted through theroad works.”– Paul Luft, Atkins Senior Engineer, seenleft on site with Wan Sim Tan, GraduateEngineer.

WS Atkins plc Annual Report 200404

belowAtkins is performing structural assessments on80 miles of tunnels, 2,800 bridges and structuresand nearly 100 miles of embankments tounderstand the condition of the assets andidentify any necessary repairs or replacement.

“The Metronet bid team achieved a fantasticlevel of integration, with engineers of alldisciplines workingtogether to decide howbest to deliver LondonUnderground’s serviceaspirations. I think wewere all genuinely excited to be involved in the start of such asignificant project, and to feel that we had a realmandate to transformthe daily journeys ofmillions of networkusers.” – Andrew Love, Atkins Signalling Engineer and capability consultant seconded to theMetronet bid team.

WS Atkins plc Annual Report 2004 05

Improving the London UndergroundAfter years of under-investment a massive upgrade project isunderway to transform the London Underground into a modernand efficient transport network. Atkins’ core skills are central to the £17bn renewals and upgrade programme.

PlanFinancial close of the Metronet PPP contracts represented theconclusion of four years of detailed planning. Over 200 Atkinsengineers, planners, quantity surveyors and accountants wereseconded to the bid team over this period, planning and pricing the programmes for asset management, capital investment andperformance improvement.

DesignIn the first year of the PPP contracts, more than 350 of our railexperts in the UK and Denmark started work on designs for therefurbishment and modernisation of 150 stations. By the end ofMarch 2004 we had submitted initial designs for a number ofstations including Oxford Circus, one of the network’s busiest.Design work on a further 68 stations will be delivered during thenext year.

We are also designing and building new communications systemsincluding passenger information, CCTV and public address systems, Help Points and destination indicators.

EnableOne of the exceptional challenges in this project is enabling thenetwork to operate with minimal disruptions while undertakingsignificant modernisation and refurbishment work. Behind thescenes, our project and asset managers and our experiencedengineers are making a significant contribution to ensuring thatwork on the stations and civils infrastructure proceeds to plan.

belowOur Station Design Team has proposedthese initial designs for Turnham Greenstation. In all, 150 stations will berefurbished including 10 by the end of 2005.

leftAtkins is working on the Bakerloo, Central,Victoria and Waterloo City (BCV) lines andthe District, Circle, Hammersmith, City,Metropolitan and East London sub-surfaceline (SSL). Together they account for overtwo thirds of the London Undergroundnetwork and carry 2 million passengers daily.

WS Atkins plc Annual Report 200406

An iconic resort for BahrainA string of islands linked by bridges in a lagoon, forming a uniquesetting for 1,800 villas, retail and leisure facilities and a centrepiecemarina: this was the concept conjured by our designers for a newresort in Bahrain. It was a dramatic vision which captivated theclient, securing Atkins a commission to design and assist in theprocurement of the £550m development.

Atkins is providing a full range of professional services to the project,including architecture, engineering design, construction supervisionand project management. The resort is due to be completed in early 2009.

PlanThe value of a scheme depends on the quality of the concept design,a philosophy demonstrated in Atkins’ award winning design of theBurj al Arab, the celebrated seven star landmark hotel in Dubai. Thesame ethos underpins the visionary masterplan for Durrat, unveiledin April 2004.

DesignProjects such as Burj al Arab have proven our ability to assemble a multi-disciplinary team from our own resources, supporting worldclass iconic design with detailed engineering. The Atkins team willbe responsible for all the design including ground and marineengineering, utility infrastructure and the design of the villas andhotels including the environmental and ecological challenges posedby the scheme.

EnableRealising the project will be a huge undertaking. Progress will beclosely monitored by a dedicated site team which will be responsiblefor ensuring that all aspects of quality are properly supervised.Environmental studies have addressed in detail the impact of thedevelopment, which will be monitored closely throughout theproject life cycle.

WS Atkins plc Annual Report 2004 07

Mahmood Abdul Rahman, General Manager of the Durrat Khaleej Al Bahrain Company,described Atkins’ designs as “examples ofperfection and magnificence.”

rightOur coastal engineers used numericalwave simulations to ensure that the resortwill be appropriately protected from highwater levels and storm wave conditions.

below, leftThe twelve man-made islands andextensions to the existing mainland willhave a surface area of over six millionsquare metres. 20 million cubic metres of new land will be reclaimed.

belowBahraini pearls are reputed to be the most beautiful in the world andBahrain was famous for its pearl fishers in the first half of the 20th Century. Ourdesigners based their concept for theresort on a string of pearls.

“This is the project of a lifetime. Technicalchallenges aside, we are developing a newglobal landmark whichwill be as instantlyrecognisable as theSydney Opera House.”– Simon Crispe, Atkins Commercial Director (Middle East Region).

WS Atkins plc Annual Report 200408

Colchester GarrisonredevelopmentColchester Garrison is home to 16 Air Assault Brigade, Britain’sprimary rapid reaction force. Atkins is a member of the RMPAconsortium awarded a 35-year Private Finance Initiative (PFI)contract by the Ministry of Defence (MoD) to redevelop and runfacilities at the site. The project will provide high quality, servicedaccommodation for the 3,500 military personnel who live and work at the garrison, as well as training, recreation, education and welfare facilities.

PlanWorking closely with the MoD and design and build contractorSir Robert McAlpine Ltd, Atkins planned a development to meet theneeds and the aspirations of the army of the future while satisfyingaffordability criteria and local Town Planning requirements. Atkinsprepared design information in support of the planning submissionfor 137 buildings together with an environmental statementcovering ecology, ground contamination and air quality in relationto both the new garrison facilities and the re-development of theold site. After extensive public discussions and negotiations,Planning Consent was granted in July 2003.

DesignOur 160 plus team of architects, civil and structural engineers and landscape designers brings the array of skills needed for thiscomplex project. Detail designs and production information are now in preparation which will allow the contractor to implementthe scheme efficiently within the parameters of the PFI contract.

EnableMore than 95 per cent of the redeveloped garrison will be newbuild. To meet tight time scales, some of the accommodation will be prefabricated and assembled off site to reduce construction time and improve the quality of installation. Design will continue to December 2005 with construction progressing through to 2008.Our Defence Asset Management team is providing building andestate maintenance services together with energy and wastemanagement for the duration of the 35-year contract.

above, belowOur designs for the GarrisonHeadquarters, including the well-definedentrance and high quality interior fit, set a high aesthetic standard and aim to provide a sense of pride and place for the 3,500 military personnel based at Colchester.

WS Atkins plc Annual Report 2004 09

“One of several innovative ideas was to co-locatethe client team of design coordinators with theAtkins design team, with the object of speedingup communication and decision making – this hasproved particularly successful.”– Barrie Nickolls, Design Manager, Sir Robert McAlpine Ltd.

“Over the next eighteenmonths my team of 160 will deliver co-ordinatedmulti-disciplinary designsto enable Sir RobertMcAlpine to meet theirdemanding constructionprogramme. It is alogistical challenge and we have enhancedour design proceduresand methodology tomeet it. We have alsodeveloped a number ofinnovative CAD tools toensure a consistent andefficient approach acrossthe project.”– Valerie Evans, Atkins Project Manager.

belowWe have prepared detailed façadedrawings to demonstrate the quality of the designs. This one shows thearticulation of the bay elevations for the Brigade HQ.

WS Atkins plc Annual Report 200410

Re-signalling on the West Coast Main LineThe project to renew signalling infrastructure on a 30-mile sectionof the West Coast Main Line between Rugby and Wolverton wasan important part of the programme to upgrade the line speed to125mph by Autumn 2004.

PlanTo ensure safety at high speeds and optimum performance, Atkinsused virtual reality technology to review many of the signals andensure each one was clearly visible to train drivers. Where necessary,signals were repositioned to improve visibility and conform to theUK’s strict rail infrastructure standards.

An Atkins-led team developed and commissioned signallingmodifications for the driver training areas required by Network Rail for the new Virgin Pendolino tilting train. Drivers must undertakecomprehensive training test runs on the track before the line speed is uprated.

DesignWorking in close partnership with infrastructure operator NetworkRail, Atkins designed and delivered a new signalling control systemand data transmission links; new, improved train detectionequipment using axle counter technology; and new LED signals and point operating mechanisms. All these will improve rail trafficflows and system reliability.

EnableDuring the early design work for the control system it became clearthat there was a need to accelerate part of the programme to meetthe overall time scales for the project. Consequently a new tool wasdeveloped to automate design of the control system data, savingseveral weeks of design and testing time.

rightOur team has delivered 100 new signalson 85 signal posts and 15 gantries.

WS Atkins plc Annual Report 2004 11

“Rugby has been a challenge to meet Network Rail’s needs, both technicallyand in terms of time scale. Our expertise in this specialist field of engineeringhave enabled us to solve all the problems the project has presented us with andyet still meet some very tough deadlines. We have only been able to achievethis through the contribution of our excellent people.”– Liz Plumb, Atkins Director Signalling Projects.

leftThe WCML is Europe’s busiest mixeddensity railway, used by 2,000 passengerand freight trains daily, including the new tilting trains servicing the busy routebetween Manchester and London.

aboveAt high speeds, communication betweentrain drivers and signal boxes is cruciallyimportant. We delivered majormodifications to the radio system toimprove operational links with the newsignalling control system.

WS Atkins plc Annual Report 200412

“This is an exciting challenge to our team todeliver to Belfast a 21st Century sewerage system, thereby providing significantenvironmental benefits to the local community.” – Dr Alan Skates, Project Director.

belowThe Atkins team, led by Dr Alan Skates(second from right), reviews the projectplan with members of the team fromWater Service, Northern Ireland.

belowThe streets of Belfast were subject tofrequent flooding before the existingVictorian sewers were constructed. This project will provide the city withinfrastructure to meet current and furtherneeds, and reduce the pollutant load on the River Lagan by 85%.

“I am confident that thecombined skills of WaterService and the AtkinsTeam, together with thecontractors, will deliver a landmark project.”– Katharine Bryan, Chief Executive, Department for Regional Development of Northern Ireland, Water Service.

leftInspection of a vortex drop shaft whichfeeds flows from branch sewers into themain tunnel.

WS Atkins plc Annual Report 2004 13

A modern wastewaternetwork for BelfastBelfast’s crumbling sewer network is being repaired and upgradedunder the largest contract of its kind ever let by the Water Service inNorthern Ireland. As lead consultant, Atkins is responsible for design,procurement and management of the project, which will cost £100mand aims to prevent flooding and reduce pollution in the city.

PlanAny major construction project can affect people living nearby andthe local environment. Atkins is aiming to ensure that potentialadverse effects are minimised, with environmental specialistsworking alongside engineers for the duration of the work. AnEnvironmental Management System will be used to ensure thatenvironmental factors are taken into account and monitored asconstruction progresses.

DesignThe project will present many technical challenges to Atkins’geotechnical and civil engineers. The works include 9km oftunnelled interceptor sewer ranging from 1.8m to 4.0m diameter, a 16m3/sec capacity tunnel pumping station, upgrading of 18km of existing sewers and modifications to existing combined seweroverflows. This will help to minimise the chance of flooding withinBelfast and reduce pollution in the River Lagan.

EnableAt the outset of the project, Atkins introduced a procurementstrategy to ensure that each element of the project was fullydefined before tendering began. By the end of the year, this hadalready realised considerable cost savings for the client. Otherservices for this project will include supervision of construction,commissioning and hand-over on completion.

belowA contractor making final checks on the segment lining of a new tunnel.

WS Atkins plc Annual Report 200414

“In my view, the Groupis in better shape than at any time sinceflotation.”

Chairman’s statement

The CompanyIn my view the Group is in better shape than at any time sinceflotation in 1996. In my statement last year I outlined our medium-term objectives of returning to historic operating margins andimproving financial performance on a sustained basis. Our resultsfor the year ended 31 March 2004 represent substantial progress in our delivery against those objectives.

Continued focus on cost reduction, margin improvement and cash generation has delivered results ahead of expectations. Our performance also includes the first year of activity in theLondon Underground Metronet PPP companies in which we are a shareholder.

Our cash position emphasises the quality of these results, with cashinflow from operations of £94.4m (2003: £26.6m). In addition,disposals and the reimbursement of Metronet bid costs enabled theGroup to end the year with net cash of £68.4m compared with netdebt of £71.9m at 31 March 2003.

PeopleThe excellent results we have delivered this year reflect the talent andcommitment of Atkins’ 14,000 people. They define the capabilityand potential of the Group and I am sure that our shareholders willjoin me in congratulating them on their achievements in 2004.

In a world where talent is scarce we continue our efforts to remainthe employer of choice for graduates and experienced professionalsin the markets in which we operate. We have recently introducedflexible benefits and improvements in incentive schemes andopportunities for staff feedback. We are committed to continuingthis progress in 2005, focusing on maximising career developmentopportunities and increasing staff retention.

Social responsibilityThis year sees the publication of our first stand-alone CorporateSocial Responsibility (CSR) report, to be distributed with the AnnualReport and Accounts. CSR will become more significant to ourbusiness going forward.

WS Atkins plc Annual Report 2004 15

Board of DirectorsKeith Clarke joined the Board as Chief Executive on 1 October2003. He has brought excellent leadership qualities and experienceof businesses based on major projects. His appointment has beenwelcomed both internally and by our external stakeholders.

Stephen Billingham, Group Finance Director until 22 June 2004, willleave the Board on 24 August 2004 to take up the appointment as Finance Director of British Energy plc. Stephen is succeeded asGroup Finance Director by Robert MacLeod, previously GroupFinancial Controller. The Board wishes Stephen well in his challengingnew role and thanks him for his outstanding contribution to thefinancial recovery and stabilisation of the Group since hisappointment in October 2002.

The Board also appointed two new Non-Executive Directors in May 2004. Admiral the Lord Boyce has had a distinguished career in the Royal Navy and the Ministry of Defence. He brings defenceand public sector experience to the Group, as well as considerableinternational knowledge. Sir Peter Williams has had a verysuccessful career in industry and the academic world. He hasextensive involvement in the recruitment of graduates into theengineering professions through his chairmanship of theEngineering and Technology Board.

The appointments of Keith Clarke, Lord Boyce, Sir Peter and RobertMacLeod extend considerably the range of experience of the Boardand I am delighted to welcome them.

DividendThe Board is recommending payment of a final dividend of 7.0p,making the total dividend for the year 9.0p. Subject to shareholderapproval at the Annual General Meeting, the final dividend will bepaid on 1 October 2004 to shareholders on the register on3 September 2004.

Michael JeffriesChairman19 July 2004

16 WS Atkins plc Annual Report 2004

“Our markets arehealthy and ourcontinued focus oncost management andtargeted turnovergrowth is deliveringimproved margins.”

Chief Executive’sreview of operations

I am pleased to present my first review since joining the Group asChief Executive in October 2003. We are in good shape, havingmade demonstrable progress in returning to profitable growth. Ourmarkets are healthy and our continued focus on cost managementand targeted turnover growth is delivering improved margins.

Prospects for the future are good. The outlook for our core marketsis robust, underpinned by the commitment of the UK Governmentto continued investment in upgrading and maintaining the publicinfrastructure. Best value procurement methods represent anincreasing opportunity for organisations which can deliverconsistently high levels of quality, while increasing barriers to entryfor competitors without our impressive record in these areas.

As reported at the half year, the Group’s reporting segments havebeen consolidated into Transport, Design and Engineering Solutionsand Management and Project Services, supported by EquityInvestments. The trading operating result is reconciled to operatingprofit in Note 1 to the accounts.

Transport2004 2003

Turnover £410.3m £337.3mTrading operating profit £23.5m £10.1mMargin 5.7% 3.0%

Transport is one of the largest providers of design and technicalsupport to the UK’s road and rail sector. Our significant technicalcapabilities are underpinned by extensive experience and expertproject and safety management. We can, where required, enablecritical transport infrastructure to remain in use while upgrading and maintenance is carried out.

We have a strong reputation for quality. Our transport businesseshave both attained international standards for quality andenvironmental management (ISO 9001-2000 and ISO14001), and our Highways and Transportation (H&T) business achieved the highest sector score in a recent capability assessment by theHighways Agency (HA). We are well placed to respond to theincreasingly sophisticated procurement models which are targetingbest value for major new contracts under the Government’s longterm plans to improve the transport infrastructure.

WS Atkins plc Annual Report 2004 17

The recently concluded review by the UK Rail Regulator has set theindustry agenda for the next five years, including a £23bn fundingplan to upgrade the rail infrastructure. We expect the medium termfuture of the highways market to focus on demand managementand continued investment in asset maintenance.

Turnover in Transport was 21.6% higher than last year at £410.3mprimarily due to work generated from the Metronet PPP companiesand growth of existing contracts. Trading operating profit increasedby £13.4m to £23.5m as the Group benefited from an increase inworkload from Network Rail and the elimination of loss-makingcontracts. This increase in profits resulted in a trading operatingmargin of 5.7% (2003: 3.0%). The segment contributed 43.2% of the Group’s turnover from continuing operations and 50.6% of trading operating profit from continuing operations.

RailWe provide a range of rail engineering consultancy services frommultifunctional rail design, asset management and bridge inspectionto vehicle acceptance testing. Our role as a major design engineerfor signalling, civil engineering and overhead line works enables us to make significant contributions to important rail projects suchas Network Rail’s ongoing upgrade of the West Coast Main Line(WCML), the largest rail investment project in Europe. Our teamincludes leading industry experts in signalling, systems integration,electrification, civil engineering and telecommunications. They areengaged on most of the UK’s major rail enhancement projects and on numerous projects overseas.

We completed a number of significant projects during the year,enhancing our reputation for reliable delivery of well-engineeredinfrastructure schemes on time and to budget.

The extended “blockade” of the WCML in North Staffordshire wasa key element in the upgrade to the UK’s busiest mixed traffic railwayline. The Strategic Rail Authority’s strategy of closing key stretches ofthe railway for longer periods, rather than the traditional overnightand week-end working, has shown real benefits in reducing costsand co-ordinating alternative transport for passengers. However it places a very clear requirement on the engineers to plan andexecute the project to the highest standards of efficiency and quality.During the blockade we were responsible for the disconnection,reconnection and testing of all the signalling equipment andoverhead power lines along 56 miles of track. We also upgradedthe power signal box at Stoke, automated level crossings andupgraded the digital axle counters, a new technology designed to improve safety.

In system integration, we assisted Network Rail in demonstratingthe safety case for two new Computer Based Interlockings (CBIs).These are the next generation of signalling technology and offer ourclient enhanced performance and reduced maintenance costs. Weprepared the Engineering System Safety Case for the CBIs installedby Network Rail at Stockport and Dorset Coast.

Successful starts were made on a number of new long-term projects,including the first year of our 10-year Structures ExaminationContracts for Network Rail in the South of England and Scotland. In addition more than 300 Atkins Rail staff were mobilised to beginwork on upgrading the London Underground. By the end of March,our teams had carried out approximately 8,000 civil structureinspections and completed initial designs for the refurbishment of several stations, with work on a further 30 underway.

In Scandinavia, we are the largest privately operated railconsultancy. Here, our operations had another successful year,winning a commission to develop a new relay interlocking system at Flintholm station in Copenhagen and bringing their specialistskills in acoustics and control rooms to the station design work onthe London Underground.

Highways and TransportationWe are Managing Agent for three of the HA’s 15 Areas, andManaging Agent Contractor for a fourth in the Optima partnership.Under these contracts we have responsibilities for network andmaintenance management, including planning, design andsupervision of network improvements, safety inspections andoperational management of abnormal loads and network incidents. As Managing Agent, we co-ordinate routine and wintermaintenance; as Managing Agent Contractor, we also undertakethis work.

We also support the development of new roads and roadimprovement programmes such as the widening of the M25 nearHeathrow Airport and the provision of spur road access to the newfifth terminal. During the year, our designers won an award for ‘civil engineering excellence and innovation’ for the new MedwayBridge, which forms part of the A2/M2 widening project. Theopening of the UK’s first toll road, the M6 Toll, marked the end ofmany years of planning during which we co-designed the newmotorway, helped develop the business case and presented trafficevidence at the Public Inquiry.

18 WS Atkins plc Annual Report 2004

1 In Scandinavia, we are the largestprivately owned rail consultancy.

2 We have made a significantcontribution to the upgrade of the West Coast Main Line.

3 Atkins co-designed the UK’s first tollroad, the M6 Toll.

Consistent delivery of a high quality service continues to form thefoundation for strong and enduring relationships with our majorclients. In this respect we had a particularly successful year. InDecember 2003, we were assessed by the HA using a new vendor-rating system, the Capability Assessment Toolkit (CAT). The CATsystem reviews in depth the quality of supplier capabilities todetermine who can bid for new HA contracts. We were proud to achieve the highest CAT score of all consultants in the sector, a tribute to the capability of our people and the quality of ourmarket offering.

Strong relationships with existing clients enabled us to expand and extend the scope of a number of contracts in the year. Theseincluded the extension of our Northamptonshire HighwaysPartnership to include Northampton Borough Council and therenewal and extension of our Stirling Consultancy Services TermCommission to include Clackmannanshire and Falkirk. 2004marked the successful completion of the first year of our 5-yearpartnership renewal for integrated highways and transport serviceswith Somerset County Council. We continue to work closely withour partners in Optima to deliver best practice network managementand maintenance on behalf of the Highways Agency.

The mid-term of the Government’s 10-year Transport Plan has seen a marked shift in focus from planning to delivery of transportimprovements. During the year, we continued to work closely withnational, regional and local agencies to deliver key elements of theirstrategic and local transport plans to reduce congestion throughimproved transport integration, better traffic management andimproved travel information. Our work on developing the softwarefor a new National Journey Planner is nearing completion. ThePlanner, covering all modes of transport, will enable people tounderstand all the travel options available to them beforeembarking on their journeys.

The strength of our position in intelligent transport systems wasreflected in the award of a multi-million pound contract from the Welsh Assembly to develop, implement and operatetelecommunications and intelligent transport services on motorwaysand trunk roads throughout Wales. In total, we are currentlydesigning and implementing six national, regional and localauthority control centres throughout the UK to collect, analyse and disseminate real time data on aspects of traffic flow. These will all be operational within the next year.

Chief Executive’sreview of operationscontinued

1

2

3

19WS Atkins plc Annual Report 2004

Design and Engineering Solutions2004 2003

Turnover £264.3m £241.7mTrading operating profit £13.4m £3.2mMargin 5.1% 1.3%

Design and Engineering Solutions provides ‘clever’ design andengineering. Our multi-discipline teams draw on the expertise ofarchitects, planners and engineers, as well as environmentalconsultants and specialists in other key related disciplines.

Conditions in our key markets were good in the year, with ongoingpublic sector investment providing a steady stream of work. Looking ahead, public sector initiatives such as the £8bn educationprogramme announced by the Chancellor in the recent budget are expected to present ongoing opportunities in areas of provenstrength. Regeneration and environmental improvement schemesare also likely to present opportunities for us in the coming year.

Turnover in Design and Engineering Solutions was 9.4% higher than last year at £264.3m reflecting better market penetration andwork on the Colchester Garrison design contract. Continuedprogress on reducing costs, combined with concentration on coreactivities, helped lift trading operating profit to £13.4m (2003: £3.2m)and trading operating margin to 5.1% (2003: 1.3%). The segmentcontributed 27.8% of the Group’s turnover from continuingoperations and 28.9% of the Group’s trading operating profit fromcontinuing operations.

Design, Environment & EngineeringOur 3,100 architects, planners and engineers design buildings,provide town planning and urban design services and act asconsulting engineers for a wide range of infrastructure projects.

UK construction continued to be driven by public sector investmentduring 2004, enabling us to consolidate our position in educationand health. We have designed over 50 new schools in the last threeyears and prepared refurbishment plans for over 1,000. In health we work for all of the 15 NHS Boards in Scotland.

Important new contracts during the year demonstrated the scaleand scope of our activities. Alongside specialists from Atkins Rail, we began work on designs for the refurbishment of stations on theLondon Underground under the Metronet Public Private Partnership.The Private Finance Initiative project to re-develop the army facilitiesat Colchester Garrison reached financial close in February 2004. Our design team had been working on the project pre-closure, buthas since been fully mobilised to support this project.

In Lytham St Annes we won the competition to design a majorintegrated leisure and residential development. In Glasgow weworked in partnership with architects Richard Rogers on acompetition-winning design for a new pedestrian bridge over theClyde. In London our widely acclaimed pedestrianisation andlandscaping of Trafalgar Square won a Civic Trust award. Augustsaw the successful completion of the rebuilding of Hornsea townpromenade as part of a pilot scheme under the Market TownsInitiative for regeneration in Yorkshire. We prepared the designs for the new seafront facilities, which won an award from theLandscape Institute, and managed delivery of the project.

The trend for the public sector to procure services throughframework contracts continued during the year. We benefited fromsuch agreements with key clients such as the Environment Agencywhere work included design of new flood defences in the SevernValley and the Department for Work and Pensions where wedesigned and project managed the re-branding of over 120JobCentre+ offices throughout the UK.

Internationally our operations in the Middle East continued tobenefit from high levels of investment in the region. In Bahrain wewere appointed masterplanners and engineers for the Durrat Islandresort development. 2004 saw completion of the world’s tallestresidential tower in Dubai, which we designed, and we are currentlyworking on a number of other similar towers in the region. In Libyawe have completed the concept design for a new tourist resort atSidi Benure. The strongly performing Chinese economy presentedsignificant opportunities. During the year, our review of theShanghai masterplan led to several follow up commissions including masterplanning for a new town in Jiading and the urbanregeneration planning of the South Station area with links to theShanghai 2010 Expo site.

20 WS Atkins plc Annual Report 2004

IndustryAtkins Industry is one of the largest engineering consultants in theUK utility, defence and oil & gas markets. Our services includeengineering, planning, design, analysis and project management.We re-focused our operations during 2004 to concentrate ondefined segments within each of our target markets, and we have a strong presence in each of these.

Regulatory requirements and UK Government targets droveincreased investment in utility infrastructure. We continued toundertake work for the majority of the water and wastewatercompanies in the UK as well as for the Environment Agency withwhom we have a significant framework contract. Work on ourwater technology products also bore fruit with the receipt of theIWEX innovation award for the SONIX™ technology, which wedeveloped to enhance traditional wastewater treatment process. In the power sector, demand was healthy for design and projectmanagement services in transmission and distribution. Support ofnuclear generation assets provided a healthy workload. Renewableenergy is a specific growth area and we are working with bothestablished and emerging technologies. Demand for our projectservices in Telecoms also strengthened over the year.

In the defence sector, opportunities exist in high-end technicalequipment and systems development. We are involved in significantprojects supporting Rolls-Royce in designing the lift fan and F136engine for the Joint Strike Fighter, and Airbus in designing the wingfor the A400M, the Hercules replacement. While the civil aerospacemarket is generally challenging there is significant demand for ourservices from Airbus and Rolls-Royce on the A380 super-jumbo andTrent 1000 engine respectively.

Improved extraction techniques are extending the life of oil fields,while the need to find new sources of hydrocarbons is drivingexploration and development into deeper waters offshore. Boththese factors are creating a growing demand for the safety, processand structural services that we provide to the sector. We focus onperformance efficiency, reducing costs and extending the life of keyassets. Recognising the increasingly global nature of the sector, in2004 we expanded our presence in Houston and opened a newoffice in Paris, strengthening key relationships with clients such asBP, Total and Exxon Mobil.

Chief Executive’s review of operationscontinued

1

2

3

1 We are working on six traffic controlcentres throughout the UK.

2 The Welsh Assembly has appointedAtkins to develop intelligent transportsystems.

3 We worked on the award-winningdesign for a new pedestrian footbridgein Glasgow.

21WS Atkins plc Annual Report 2004

Management and Project Services2004 2003

Turnover £209.0m £188.1mTrading operating profit £3.6m £2.1mMargin 1.7% 1.1%

Management and Project Services supports the development andongoing operation of our clients’ assets, providing a variety of servicesincluding cost planning, IT implementation and facilities management(FM). We are well placed to support forthcoming public sectorinitiatives in urban regeneration and IT infrastructure development.In FM the range of services covered by outsourcing arrangements isexpanding, encompassing service delivery and increasingly providingroutes to market for professional and project services.

Turnover in Management and Project Services was 11.1% higherthan last year at £209.0m, mainly as a result of the inclusion of a fullyear’s turnover from Hanscomb (acquired in June 2002). The sectorcontributed 22.0% of the Group’s turnover from continuingoperations in the year. Trading operating profit from continuingoperations was £3.6m compared to £2.1m in 2003, after provisionsin respect of under-performing FM contracts. Trading operatingmargins increased to 1.7% (2003: 1.1%).

Faithful & GouldFaithful & Gould (F&G) provides cost and project managementservices, playing an integral part in many of the Group’s complexprojects as well as supporting external clients in the UK, USA and Far East.

We continued to support the Government’s investment agenda,providing project management and planning supervision services to HM Prisons and cost management services to Derbyshire CountyCouncil under framework contracts. We provided PFI technicaladvice on nine separate Local Authority school developments, andproject and cost managed a number of regeneration initiatives forthe Sunderland Area Regeneration project and in the Lea Valley forthe London Development Agency.

In the transport sector, we worked on the transfer of maintenanceworks contracts back to Network Rail. We also securedappointments to provide cost planning on the major Kings Crossredevelopment and cost estimating on the multi-modal transportinfrastructure for the Olympic bid masterplan.

In the retail sector, we act for Selfridges in their UK capital worksprogramme. During the year, we provided lease negotiation, projectmanagement, contract administration and planning supervisionservices for the base build and fit out of their iconic Birminghamstore, as well as supporting development work at Manchester andOxford Street.

Our US operation continued to build on key relationships with Intel,BP, American Airlines and DHL. We provided cost management onAmgen’s bio plant development on Rhode Island, and to the LowerManhattan Development Corporation’s redevelopment of theWorld Trade Centre. In the Far East we are supporting investmentinto Singapore and China by pharmaceutical and petrochemicalcompanies including Merck, Schering Plough, Novartis, BASF and Huntsman.

Asset ManagementWe provide a range of FM services, including strategy development,service delivery, helpdesk provision, operational asset managementand maintenance and procurement support. Our ability to draw onthe expertise of other parts of Atkins is key to our market offering.

Following last year’s review of operations we have focused onmargins and cash generation during 2004. We also secured a 35-year contract to provide estate management and maintenanceservices to the redeveloped Colchester Garrison, and new contractswith Bexley Council and the newly restructured Littlewoods Group.

Management ConsultantsWe support complex programmes of business change. We are asignificant supplier of management consultancy services to centralGovernment, with particular strengths in project and programmemanagement.

2004 saw a near doubling in the market for public sector work.Programme and project governance is emerging as an importantarea of growth and we worked closely with the Office for NationalStatistics, Office of the Deputy Prime Minister and the Departmentfor International Development to help them achieve aspects of theOffice of Government Commerce’s initiative to improve process formanaging major projects.

We also grew our IT Managed Services practice, negotiating longerand broader contracts with, amongst others, Swindon BoroughCouncil where we have successfully delivered technology refresh and implementation projects, amongst other services. We divestedourselves of some low margin local Government business processwork, improving our focus on high value consultancy.

22 WS Atkins plc Annual Report 2004

1 Our designs for the pedestrianisationof Trafalgar Square won a Civic Trustaward.

2 We designed new seafront facilities for Hornsea, Yorkshire.

3 We are supporting Rolls-Royce indesigning key elements of the new Joint Strike Fighter.

Equity Investments2004 2003

Turnover £66.8m £66.6mTrading operating profit £5.9m £4.7mMargin 8.8% 7.1%

Joint Venture turnover £152.8m £17.1mJoint Venture profit before tax £12.8m £0.8m

Equity Investments represents the Group’s interest in Joint Ventures,PFI and PPP initiatives and Lambert Smith Hampton (LSH), a whollyowned subsidiary company run as a stand alone brand in thecommercial property market.

Turnover in Equity Investments, which primarily relates to LSH, was in line with last year at £66.8m and accounted for 7.0% of theGroup’s turnover from continuing operations. Trading operatingprofit from continuing operations increased to £5.9m (2003: £4.7m)due to the inclusion of fees and other income generated from theMetronet PPP companies.

The Group’s share of the profit before tax of its Joint Ventures rosesubstantially from £6.7m last year to £20.6m this year, primarily dueto the inclusion of the first year’s trading in Metronet. The results forthe year included profit before tax of £6.1m from Joint Ventures that were sold in the year.

MetronetIn April 2003 the Metronet consortium, in which we have a 20%share, achieved financial close on two contracts with LondonUnderground. These represent the Group’s most significant PPPproject to date.

Metronet runs the London Underground infrastructure companiesMetronet Rail BCV Limited, incorporating the Bakerloo, Central,Victoria and Waterloo & City lines, and Metronet Rail SSL Limited,incorporating the Metropolitan, District, Circle, Hammersmith & Cityand East London lines. Together these account for over two thirds of the London Underground network. Metronet is now beginning a programme of repair and refurbishment that will in time deliversubstantial improvements to the infrastructure and enable LondonUnderground to operate a more frequent and reliable service.London Underground will remain responsible for the managementof the network, including drivers, signalling and station staff and the Safety Case. It will also be responsible for ticketing and fares.

Chief Executive’sreview of operationscontinued

1

2

3

23WS Atkins plc Annual Report 2004

Trans4m Ltd, a Joint Venture company in which Atkins has a 25%stake, has contracted with the Metronet PPP companies to undertakethe civil engineering work and the refurbishment and modernisationof the stations. Trans4m Ltd has signed a 71/2 year contract withAtkins for premises and civils design, inspection and assessmentwork and the design and build of new communications systems.The year to 31 March 2004 was the first full year of operation, withthe main focus on establishing the organisational structures andresources for the Joint Ventures and their supply chains, introducingnew systems for financial and asset management and ensuring thatsafety standards were maintained and enhanced.

Intensive maintenance activity including targeted removal of graffitiand litter and deep-cleaning of stations and rolling stock haveresulted in noticeable improvements for passengers in the first yearof the PPP. Operational performance was significantly impacted bythe Chancery Lane accident which occurred in January 2003 priorto the transfer of responsibilities to the Metronet PPP companies.The inquiry into the accident recommended a number of actionswhich delayed planned maintenance activity. In spite of this, servicereliability targets were being achieved by the end of the year.

There have been delays to the capital works programmes for stationand rolling stock refurbishment. This is not surprising in the contextof the scale and complexity of the investment programme. Measuresare in hand to compensate for the delays with the objective ofmitigating any potential impact on delivery timetables. We arecommitting substantial senior management resource to ensuringdelivery of the Metronet supply chain contracts and overseeing our investment.

Equity ManagementEquity Management provides financial and technical support to theGroup’s participation in PFI/PPP initiatives.

In May 2003, as part of the Connect Roads Joint Venture, weachieved financial close on the M77 Design Build Finance Operate(DBFO) PFI Road project. In February 2004, as part of the Holdfastconsortium we achieved financial close on the Colchester GarrisonPFI project.

The maturing PFI/PPP market has led us to refine our PFI model.Third party equity is increasingly available at an earlier stage in theconcession, allowing Atkins to focus on design, bidding andprocurement rather than long term equity investment. During theyear, we disposed of our interest in all but one of our Schools PFI projects and all of our Connect Roads projects for a totalconsideration of £17.2 million. We also disposed of our interest inAtkins Rebserve (Proprietary) Ltd, the company established toundertake the Telkom South Africa facilities management contract.

Lambert Smith HamptonLambert Smith Hampton (LSH) provides a broad range of propertyconsultancy and transactional services. Its activities include commercialagency and investment advice, valuation services, landlord andtenant advice, property management, building surveying and rating advice. With staff based at 29 offices across the UK and theRepublic of Ireland, it offers the benefits of both in-depth localknowledge and consistently high service standards nationwide.

Weakness in the London office market throughout the year wasoffset by relatively better conditions in the regions. The key cityoffices of Manchester, Birmingham and Bristol all had successfulyears, and in St Albans we entered a new contract to provideestates and valuation services for Hertfordshire County Council.Estates Gazette named LSH Most Active Agent in the UK for thethird year in succession.

The retail market remained robust, supported by consumerspending growth. The industrial sector continued to under-performin the light of weak occupier demand and the difficulties faced bythe manufacturing sector, although the distribution sector remainedactive. The investment market continued to be dominated byoverseas and private investors with intense competition and thesheer weight of money resulting in hardening yields.

The year saw strong growth in consultancy services, particularlyprofessional and rating advice. Growth in the market for outsourcedproperty advisory services provided opportunities, and newcontracts were secured with Kwik-Fit, Land Securities Trillium andMapeley on a nationwide basis.

Improving economic conditions are expected to revive the office andindustrial sectors, although rising interest rates may curtail growth in the retail sector as consumer spending slows. Investor appetitesappear to be undiminished, but activity levels may fall due to scarcityof product. The trend for companies to outsource non-core propertyservices and award contracts on a national basis is expected togrow, meaning that agents with an extensive geographic reach will be well positioned to meet customer requirements.

OutlookI am confident that the Group is well positioned. The outlook for ourmarkets is robust. We will continue to focus on our core competencies,with margin improvement and cash generation remaining key.

Keith ClarkeChief Executive19 July 2004

24 WS Atkins plc Annual Report 2004

“This year has beenabout restoring the balance sheet,delivering cashgeneration andimproving levels ofprofitability. All thesefinancial objectiveshave been achieved.”

Financial review

This year has been about restoring the balance sheet, delivering cash generation and improving levels of profitability. All thesefinancial objectives have been achieved.

TurnoverTurnover from continuing operations rose from £833.7m to £950.4m.This was principally due to growth of existing contracts and thegeneral improvement in market conditions as well as the workgenerated by the Metronet PPP companies. The Group continues to pursue targeted turnover growth at better margins.

Adjusted profitThe table below shows the calculation of Adjusted profit before taxand its relationship to profit before tax:

Restated*2004 2003

Segmental trading operating profitContinuing operations 46.4 20.1Discontinued operations (1.1) (1.3)

45.3 18.8Share of Joint Ventures profit before tax 20.6 6.7Net interest payable and financing charges (6.7) (2.1)PFI bid costs (excluding Metronet) (3.0) (4.7)

Adjusted profit before tax 56.2 18.7Metronet bid costs – (8.4)Amortisation of pension fund

(deficit)/surplus (3.4) 3.7Amortisation of goodwill (7.8) (11.1)Colchester Garrison dilution gain 4.8 –Exceptional items 13.5 (48.1)Employee Benefit Trusts (1.3) (0.1)

Profit/(loss) before tax 62.0 (45.3)

* 2003 figures have been restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended (Employee Share Schemes).

Adjusted profit before tax for the year to 31 March 2004 was£56.2m, an increase of £37.5m compared with last year. Thisturnaround reflects the strength of the Group’s underlyingbusinesses, the continued control of the Group’s overheads and theelimination of loss-making contracts and low margin activities. TheGroup’s trading operating margin on continuing operations beforeJoint Ventures was 4.9% (2003: 2.4%), demonstrating substantialimprovement upon last year and good progress towards achievingthe Group’s objective of returning to historic margin levels.

25WS Atkins plc Annual Report 2004

Segmental performanceAs detailed in the Chief Executive’s review of operations theindividual segments have all performed well in terms of underlyingtrading, although the results were adversely impacted inManagement and Project Services by provisions made againstcertain FM contracts. The provisions were made following detailedreview of the prospects for these contracts over the remainder oftheir respective terms.

Joint VenturesThe inclusion of the first year’s trading on Metronet significantlyenhanced the Group’s share of the profit before tax of its JointVentures from £6.7m to £20.6m. Profit in the year relating to JointVentures that were sold during the year amounted to £6.1m.

MetronetIncluded within Adjusted profit for the year is the Group’s interest in,and the results of trading with, the Metronet PPP companies:

2004£m

Metronet PPP companies 10.8Supply chain and other fees (including Trans4m Ltd ) 5.4Costs of letters of credit to support equity commitments (4.2)

12.0

The Metronet PPP companies and Trans4m Ltd achieved the overallbudget targets established prior to transfer, but with some variationsto income and costs. Metronet’s income from London Undergroundis subject to adjustments depending on the performance of theassets. In its first year, performance abatements resulted in incomeapproximately £10m below budget, although a significant proportionof this amount remains under discussion with London Underground.The income shortfall was offset by lower than expected funding andadministration costs. There was, however, a slower than anticipatedbuild up in activity and consequently the capital works programme is behind schedule. The Metronet PPP companies are working withLUL and their supply chains to address these delays.

On Financial Close the Group received £20.1m in respect ofrecovery of bid costs and a development fee. This amount has been capitalised and will be released to the profit and loss accountover the 30-year concession. The Group will invest £70m in theMetronet PPP companies by way of equity and shareholdersubordinated debt over six years in return for a 20% shareholdingin the consortium. The equity contributions will be in roughly equaltranches over the six year period. The Group obtained StandbyLetters of Credit from its banks to support the deferred element of its equity commitment. The fees for the Standby Letters of Creditincluded an agreement to issue warrants in respect of 4.7m WS Atkins plc shares. The cost of these warrants (£6.9m) will becharged to the profit and loss account over the life of the StandbyLetters of Credit.

Net interest payableExcluding Joint Ventures, net interest payable has risen from £2.1m to £6.7m (excluding £0.1m Employee Benefit Trusts interestreceivable), which includes £4.2m in respect of the MetronetStandby Letters of Credit. Going forward, interest and othercharges are expected to reduce significantly as the cash positionremains positive and the cost of financing the Group’s investment in Metronet reduces.

Bid costsThe results are after charging bid costs of £3.0m (2003: £13.1m) on PFI/PPP projects, principally Colchester Garrison. No costs werecapitalised with respect to PFI/PPP bids during the period underreview. Cumulative bid costs and development fees of £32.8m(2003: nil) were received in respect of Metronet, ColchesterGarrison and other PFI/PPP projects and, where the shareholding is retained, will be amortised over the life of the concessions inaccordance with the Group’s accounting policies. A further £0.8mof bid cost recovery on Colchester Garrison will be received inAugust 2004.

On Financial Close of the Colchester Garrison PFI, the Grouprecovered £8.4m of bid costs and project development fees. Due to the reduction in the Group’s interest in the project from 33% to14%, £4.8m of the amount recovered was recognised as income inthe profit and loss account (but not included within Adjusted profit),with the remaining £3.6m treated as deferred income.

26 WS Atkins plc Annual Report 2004

PensionsAn interim actuarial assessment of the principal defined benefitpension schemes was undertaken for the Group during the first half of the year. This indicated that the principal staff scheme had an actuarial deficit of approximately £65m at 30 September 2003. The pension charge for the year included within Adjusted profit has increased by £2.3m. The amortisation of the pension surplus (2003: £3.7m) has been replaced by a charge of £3.4m to amortisethe estimated deficit (not included in Adjusted profit). The Groupcontinues to account for pension costs under SSAP 24. However, if the Group adopted FRS17 the Group’s profit before tax would be reduced by £6.3m (2003: increase in loss before tax £2.5m).

The interim actuarial assessment indicated that additional annualcash contributions of c.£7m were required with effect from 1 April 2004. To mitigate the cost to the Group, an increase in staffcontributions has been agreed, to be phased in over two years. The Group has increased its cash contributions by £3.5m a year.

Exceptional items and discontinued operationsThe Group announced the sale of its largest US business, AtkinsAmericas Holdings Inc. (formerly Benham) on 9 September 2003for £11.3m in cash. Under the terms of the sale agreement theGroup retained contingent liabilities in the form of performancebonds for two existing projects. Both projects have now reachedpractical completion and the warranty period is expected to expireby the end of December 2004.

In accordance with the Group’s intention to recycle capital investedin mature PFI investments at the appropriate time, the Group hasdisposed of its interest in all but one of its PFI schools projects and theConnect Roads PFI projects for a total cash consideration of £17.2m.

The Group also disposed of its interest in Atkins Rebserve (Proprietary)Ltd (AtReb). AtReb has an interest in TFMC (Proprietary) Ltd, whichwas the company established to undertake the Telkom South Africafacilities management contract.

The Group sold the Belfast branch of LSH for £1.6m.

The Group’s involvement in Education Services (principally theSouthwark contract) ceased in August 2003.

TaxationThe Group’s effective tax rate in 2004 returned to its normal level of 31.5% (2003: 18.7%) of Adjusted profit. The tax charge onoperations increased to £17.4m (2003: credit £4.6m) as the Groupreturned to profitability. The disposals made in the year were mainlytax free. Tax payable on disposals and other exceptional items was £1.1m.

DividendsThe Board has recommended payment of a final dividend of 7.0pper share, making a total dividend for the year of 9.0p. Subject to shareholder approval at the Annual General Meeting, the finaldividend will be paid on 1 October 2004 to shareholders on theregister on 3 September 2004. As stated in the Interim report, theBoard wishes to see progression towards a dividend covered around2.5 times by cash-backed earnings before amortisation of goodwill.Earnings from Joint Ventures including the Metronet PPP companiesand other material PFI/PPP type investments, therefore, are onlyincluded in our calculation of dividend cover where they arematched by cash.

EPS and adjusted EPS figuresBasic EPS was 38.8p (2003: loss of 41.1p as restated). Adjusted EPSwas 39.9p (2003: 16.5p). A reconciliation between Basic EPS andAdjusted EPS is set out in Note 11 to the accounts.

Cash flowNet cash inflow from operating activities increased by £67.8m in the year due to increased profitability, further improvements toworking capital management, advance payments and a number ofcash timing differences. The cash position also benefited from thereimbursement of bid costs and development fees of £32.8m anddisposal proceeds of £37.6m. Net capital expenditure was £6.2m.Tax payments were low during the year as a result of broughtforward losses. The Group also made a planned equity injection of £10.4m to the Metronet PPP companies in the year.

The improved cash flow and disposal receipts enabled the Group torepay in full its Sterling borrowings (£47.9m at 31 March 2003) andat 31 March 2004 the Group had unutilised committed borrowingfacilities of £59.4m.

The substantial improvements made to working capitalmanagement resulted in a return to normal levels of workingcapital. Going forward, working capital is expected to remain atthese levels. Tax payments will increase as the benefit of broughtforward losses has been fully utilised. Capital expenditure is alsoexpected to increase as planned investment in the Group’s ITinfrastructure is implemented and the Group continues to fund itsequity obligations in respect of the Metronet PPP companies.

Financial reviewcontinued

27WS Atkins plc Annual Report 2004

TreasuryThe role of Group Treasury is to manage and monitor the Group’sexternal funding requirements and financial risks in support of theGroup’s corporate objectives. The Board reviews and agrees policiesand authority levels for treasury activities. Group Treasury is not a profit centre and therefore does not undertake speculative trading.

The Group funds its ongoing activities through cash generated from its operations and bank borrowings. The Group’s cash flow is analysed in detail in Note 30 to the accounts.

Private Finance Initiative (PFI) and Public Private Partnership (PPP)The Group’s PFI and PPP projects involve the Group in arrangingfinance as part of the overall project service. Individual projects areundertaken in Special Purpose Companies (SPCs) in Joint Ventureswith other parties. These SPCs contract with end users for theprovision of serviced facilities and also arrange funding, construction,facilities management services and, where required, operationalsupport for the project. Except for equity commitments, the fundingof these SPCs is arranged without recourse to the rest of the Group.The Group’s share of the gross assets and liabilities of these SPCs is reflected separately in the Group accounts in accordance with the provisions of FRS 9.

Interest rate and liquidity rateThe Group funds itself using floating rate borrowings. The Grouphas banking facilities which include cash facilities and bonding lines,as well as a Letter of Credit facility in relation to the ongoing equityobligations under the Metronet transaction which is discussed indetail in Note 4 to the accounts. At 31 March 2004, the amountundrawn under the Group’s credit lines was £59.4m.

Foreign currency riskThe Group, through its ownership of Hanscomb Inc., has US Dollardenominated assets. To mitigate the effect of currency exposuresarising from its net investment in the USA the Group has financedpart of its investment by borrowing US Dollars. The borrowing is currently at a floating rate of interest. The Group also hastransactional currency exposures. These exposures arise from salesor purchases in currencies other than Sterling. It is the Group’s policy to hedge the risk, where material, arising from contractsdenominated in currencies other than Sterling. At 31 March 2004the Group had outstanding forward foreign exchange contractsamounting to the equivalent of £14.1m. This included forwardcontracts to mitigate our exposure on the proceeds arising from the disposal of our interest in AtReb.

Accounting policiesThe Group’s accounting policy has been refined to accommodatethe complexity and length of contracts being entered into, includingthose contracts within the Group’s major new Joint Ventures, theMetronet PPP companies and Trans4m Ltd.

The Group has adopted the revised accounting treatment requiredby UITF Abstract 38 and the revisions to UITF Abstract 17 regardingthe accounting for Employee Benefit Trusts. Corresponding balancesheet amounts have been restated to reclassify the Company’s ownshares as deductions in arriving at shareholders’ funds at the amountof the consideration paid for the shares. Amounts in the profit andloss account have also been restated for the comparative periodspresented. These restatements do not impact Adjusted profit.

The Group is required to adopt International Financial ReportingStandards (IFRS) in its accounts for the year ending 31 March 2006.The Group has established a project team, led by the Group FinanceDirector, to plan for and achieve a smooth transition to IFRS. Theproject team is looking at all implementation aspects, includingchanges to accounting policies and systems impacts. Although the Group has not yet determined the full effects of adopting IFRS,our preliminary view is that the major differences from our currentaccounting practices will be in respect of pensions, businesscombinations, Joint Ventures and associates, and share-basedpayments. We expect that the Group will be fully prepared fortransition in 2006.

Stephen BillinghamGroup Finance Director for the year ended 31 March 200419 July 2004

WS Atkins plc Annual Report 200428

Board of Directors

Michael JeffriesChairman, age 59Michael Jeffries was appointed a Director in 1992, Chief Executivein 1995, and Chairman in 2001. He was acting Chief Executivebetween October 2002 and September 2003. He is a CharteredArchitect. Prior to joining the Group in 1975 he worked in thepublic sector and in private practice. In 1979 he was appointed aDirector of WS Atkins Group Consultants, a former Group Companyand fulfilled a number of roles including the management anddirection of major capital programmes and business development.He was appointed a Non-Executive Director of De La Rue plc in2000, Chairman of Wembley National Stadium Limited in 2002 and Chairman of Wyless plc in February 2004. He is Chairman ofthe Nomination Committee.

Keith ClarkeChief Executive, age 52Keith Clarke was appointed a Director in October 2003. He is aChartered Architect. He joined the Group from Skanska AB wherehe was Executive Vice President responsible for their activities in theUK, Poland, Czech Republic, India and China. He has over thirtyyears experience in construction and engineering having previouslyworked for the City of New York, Olympia and York, TrafalgarHouse and Kvaerner.

Robert MacLeodGroup Finance Director, age 40Robert MacLeod was appointed Group Finance Director on 23 June 2004. He is a Chartered Accountant. He joined the Groupas Group Financial Controller in March 2003 having previouslyworked in a variety of senior financial roles at Enterprise Oil plc. A graduate of Cambridge University, he trained at KPMG.

Struan RobertsonSenior Independent Director, age 54Struan Robertson was appointed a Non-Executive Director in 2000and Senior Independent Director in 2003. He is a mechanicalengineer with an MBA. He retired from BP after a 25 yearinternational career during which he held posts as Chairman of BPAsia Pacific, Chief Executive Oil Trading International and Senior VicePresident Technology and Marketing. During his time at BP he livedand worked in Africa, Europe and the Far East. Following retirementhe was appointed as Group Chief Executive of Wates GroupLimited. He stepped down from Wates Group in January 2004 to pursue his non-executive interests. He is a past Deputy Chairmanof the International Petroleum Exchange and Director of the MajorContractors Group Limited. He is a Non-Executive Director of ForthPorts plc and Henderson TR Pacific Trust plc. He is the Chairman ofthe Remuneration Committee and is a member of the Audit andNomination Committees.

Admiral the Lord BoyceNon-Executive Director, age 61Lord Boyce was appointed a Non-Executive Director in May 2004.He has had a distinguished career in the Royal Navy and theMinistry of Defence (MoD). He qualified as a submariner in 1965,and commanded three submarines and HMS Brilliant. He attendedthe Royal College of Defence Studies. Lord Boyce was promoted toAdmiral in 1995 and was Second Sea Lord and subsequentlyCommander-in-Chief Fleet before becoming First Sea Lord,Professional Head of the Royal Navy from 1998 to 2001; and Chiefof Defence Staff, Professional Head of the Armed Forces from 2001to 2003. He is a Director of the White Ensign Association. He is amember of the Remuneration and Nomination Committees.

from left to rightMichael JeffriesKeith ClarkeRobert MacLeodStruan RobertsonAdmiral the Lord BoyceChristopher KemballJames MorleySir Peter WilliamsDr Stephen Billingham

WS Atkins plc Annual Report 2004 29

Christopher KemballNon-Executive Director, age 57Christopher Kemball was appointed a Non-Executive Director in2002. Most of his career has been in investment banking in Europe,Emerging Markets and the USA. He ran the North Americanoperations of Kleinwort Benson plc from 1983 to 1986 beforemoving to Dillon Read & Co. Inc. as Managing Director jointly incharge of their European business. In 1992, he joined BaringBrothers & Co. Limited as a Director and ran its internationalcorporate finance activities from 1994, leaving in 1999. In 2000, he joined Hawkpoint Partners Limited, the independent corporateadvisory firm where he is currently Vice Chairman. He is also DeputyChairman of The Davis Service Group plc and a Non-ExecutiveDirector of Control Risks Group Limited. He is a member of theNomination Committee.

James MorleyNon-Executive Director, age 55James Morley was appointed a Non-Executive Director in 2001. He is a Chartered Accountant. He is Group Finance Director of Cox Insurance Holdings plc and a Non-Executive Director of BankersInvestment Trust plc. He was previously Finance Director at ArjoWiggins Appleton plc, Guardian Royal Exchange plc and AvisEurope plc. He is Chairman of the Audit Committee and a memberof the Remuneration and Nomination Committees.

Sir Peter WilliamsNon-Executive Director, age 59 Sir Peter Williams was appointed a Non-Executive Director in May 2004. He graduated from Cambridge University with an MAand PhD in Physics. He initially pursued an academic career, first atSelwyn College, Cambridge and subsequently at Imperial College,London. After a period with VG Instruments Limited he joinedOxford Instruments plc in 1982. He became its Chief Executive in1985 and was Chairman from 1991 until his retirement in 1999. He is Chairman of the UK’s Engineering and Technology Board, andof the National Physical Laboratory. He is a Non-Executive Directorof GKN plc and of Advent VCT1 plc and Advent VCT2 plc. Sir Peterhas previously held the posts of Master of St. Catherine’s College,Oxford, Chairman of the Board of Trustees of the National Museumof Science & Industry, President of the Institute of Physics andPresident of the British Association for the Advancement of Science.He is currently joint Patron of WISE (Women into Science andEngineering) and President of the Association for Science Education.He is a member of the Audit and Nomination Committees.

Dr Stephen BillinghamExecutive Director, age 46Dr Stephen Billingham was Group Finance Director until 22 June2004. He will leave the Group on 24 August 2004 to take up thepost of Finance Director of British Energy plc. He joined Atkins in2000 as Group Financial Controller and prior to joining the Boardin 2002 was Finance Director of the successful Metronet LondonUnderground PPP bid. Stephen spent 11 years with the engineeringgroup BICC plc (now Balfour Beatty plc), where he was GroupTreasurer. He previously held finance positions in Severn Trent plc,The Burmah Oil plc and British Telecommunications plc.

30 WS Atkins plc Annual Report 2004

Directors’ report

The Directors present their annual report on the affairs of theCompany and the Group, together with the financial statementsand independent auditors’ report, for the year ended 31 March 2004.These will be laid before shareholders at the Annual GeneralMeeting (AGM) to be held on 7 September 2004.

Principal activities and business reviewWS Atkins plc is a leading provider of professional services withoffices in the United Kingdom, Europe, the Middle East, Asia Pacific and the USA. As at 31 March 2004 it employed 13,691(2003: 15,392) permanent staff worldwide. It reports through thefollowing major segments: Transport; Design and EngineeringSolutions; and Management and Project Services, supported byEquity Investments.

The Chairman’s statement (pages 14 and 15), the Chief Executive’sreview of operations (pages 16 to 23) and the Financial review(pages 24 to 27) report on Atkins’ performance during the past year and prospects for the future. The reviews are included in thisreport by reference, together with the list of the principal subsidiaryundertakings and the countries in which they operate (Note 31 to the financial statements).

Results and dividendsThe Group Profit after tax for the year of £37.4m (2003: Loss aftertax of £38.0m restated) is shown in the Consolidated profit and loss account on page 43.

The Directors recommend a final dividend of 7.0 pence(2003: 3.0 pence) per ordinary share to be paid on 1 October 2004to ordinary shareholders on the register on 3 September 2004which, together with the interim dividend of 2.0 pence paid on30 January 2004, makes a total of 9.0 pence for the year(2003: 3.0 pence).

DisposalsDisposals made by the Group in the year are described in Note 3 to the financial statements on page 55.

DirectorsFull biographical details of the Company’s Directors at the date ofthis report are given on page 28.

The Company’s Articles of Association require that all Directorsappointed during the year retire at the AGM and offer themselvesfor re-election. In addition, one third of Directors must retire andmay be re-elected.

Paul Marsh resigned from the Board on 10 April 2003 and FrancesHeaton retired from the Board on 16 September 2003. Keith Clarkewho was appointed a Director on 1 October 2003, Sir Peter Williamsand Lord Boyce who were appointed Directors on 5 May 2004 andRobert MacLeod who was appointed a Director on 23 June 2004will retire at the 2004 AGM and, being eligible, offer themselves for re-election.

Michael Jeffries and Struan Robertson will retire by rotation at the AGM and, being eligible, offer themselves for re-election.

Stephen Billingham will resign as a Director on 24 August 2004.

The Board considers that the performance of those Directorsproposed for re-election continues to be effective and that theydemonstrate a strong commitment to their role.

Directors’ interestsDirectors’ interests in the Company are described in the RemunerationReport on pages 36 to 41.

Articles of AssociationThe Directors propose to seek shareholder approval at the AGM toamend the Company’s Articles of Association to enable it to benefitfrom the introduction of the Electronic Communications Act 2000,the Uncertificated Securities Regulations 2001 and the Companies(Acquisition of Own Shares) (Treasury Shares) Regulations 2003. The Directors further propose to amend the Articles to remove thedistinction between ordinary and special business, and to permit aproxy to abstain from voting and to vote on matters not specificallyreferred to in the Notice of Meeting. In addition, it is proposed thatthe limit on the aggregate amount of fees payable to the Non-Executive Directors be increased from £250,000 to £380,000. Thisincrease is in line with external benchmarking and will enable theCompany to appoint additional Non-Executive Directors withoutexceeding the limit. Detailed explanations of the proposedamendments to the Articles of Association are provided in theNotice of the Meeting accompanying this report.

Corporate governanceA report on corporate governance is on pages 32 to 35.

Corporate social responsibilityA separate report on corporate social responsibility, dated 19 July 2004and including detailed information in respect of social responsibility,health and safety, the environment and human resources,accompanies this report. A copy of the report is also available on the Company’s website www.atkinsglobal.com.

EmployeesThe Group communicates financial results and significant businessissues to all employees via the use of e-mail, the intranet and in-house publications. Feedback from employees is obtainedannually via a confidential survey. Where appropriate, consultationwith employee and union representatives takes place.

Employee share ownership has been encouraged over a longperiod. Later this year, UK employees will be offered the opportunityto become shareholders via the Company’s Share Incentive Plan.

The Group is committed to the fair and equitable treatment of all its employees irrespective of gender, race, age, religion, disability or sexual orientation. Policies have been implemented across theGroup to ensure that this commitment is acted on in practice.

The Group’s policy and practice is to encourage the recruitment and subsequent training, career development and promotion ofdisabled people on the basis of their aptitude and abilities, and theretention and re-training of employees who become disabled.

Business conduct policyThe Board is responsible for the Group’s Business Conduct Policy.The Group believes that integrity is a fundamental prerequisite forsuccessful business relationships, both internally and externally.Reputation, trust and confidence are essential elements which weseek to protect and enhance to the benefit of all with whom wehave a relationship. The Group seeks to understand and meet itscustomers’ needs, whilst seeking continuous improvement. Acrossthe Group there are procedures in place which seek to underpin this approach. By so doing the Group aims to meet the needs ofcustomers, shareholders and staff.

31WS Atkins plc Annual Report 2004

Supplier payment policyThe Company’s policy, which is also applied by the Group, is to agreeterms and conditions for its business transactions with suppliers andendeavour to make payment to these terms, subject to the termsand conditions being met by suppliers. As at 31 March 2004 thenumber of days’ annual purchases in the Group represented by year end creditors was 20 (2003: 29 days).

Charitable and political donationsDuring the year the Group made charitable donations of £101,000(2003: £115,000), principally to local charities serving thecommunities in which the Group operates or charities relevant to the Group’s activities. It is the Group’s policy not to make politicaldonations either in the UK or overseas.

The Group has no intention of making any political donations orincurring such expenditure in the future. However, the PoliticalParties, Elections and Referendum Act (the PPER Act) defines “EU Political Organisation” widely. There is still some uncertaintyover which bodies are covered by the definition and what will beclassified as a “Donation”. The Board will therefore seek authority at the forthcoming AGM for the Company and its main tradingsubsidiary Atkins Limited to make such political expenditure up to£100,000 in aggregate over the next year in order to preventinadvertent breach of the PPER Act.

The EuroThe impact of the introduction of the Euro on the Group has beenminimal reflecting the fact that approximately £16.3m (1.6%) of Atkins’ turnover in 2004 was generated in the 12 countriesoperating the Euro and that the Group’s local systems have beenappropriately amended. It is not possible to predict whether the UKwill adopt the Euro in the future, at what exchange rate it might beadopted or whether any impact on Atkins would be significant. The Group neither anticipates changing its reporting currency nordenominating its share capital in Euros, unless the UK decides to join the European Monetary Union.

Tax statusThe close company provisions of the Income and Corporation TaxesAct 1988 do not apply to the Company.

Share capitalFull details of the Company’s authorised and issued share capital can be found in Note 23 of the financial statements.

Substantial shareholdingsOn 22 June 2004 the Company had been notified, in accordancewith Sections 198 to 208 of the Companies Act 1985, of thefollowing interests in the ordinary share capital of the Company:

Number of Percentage of Name of holder ordinary shares issued capital

The Atkins (No.4) Employee Benefit Trust (1) 4,967,231 4.76%

Aviva plc (2) 4,268,403 4.09%Barclays plc (1) 5,060,193 4.84%Fidelity International Limited(1) 4,064,094 3.89%Legal & General Group plc (2) 3,273,110 3.13%

(1) Not a beneficial interest.(2) Beneficial interest.

Save as referred to above, the Directors are not aware of any personas at 22 June 2004 who was interested in 3.0% or more of theissued share capital of the Company or could directly or indirectly,jointly or severally, exercise control.

Directors’ responsibilitiesThe Directors are required by UK company law to prepare for eachaccounting period financial statements which give a true and fairview of the state of affairs of the Company and the Group as at theend of the accounting period and of the profit or loss of the Groupfor that period.

In preparing the financial statements the Directors are required toselect and apply consistently suitable accounting policies framed byreference to reasonable and prudent judgements and estimates.Applicable accounting standards also have to be followed and a statement made to that effect in the financial statements, subjectto any material departure being disclosed and explained in thenotes to the financial statements. The Directors are required toprepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors confirm that they have complied with the aboverequirements in preparing the financial statements. The Directorsare responsible for ensuring proper accounting records are keptwhich disclose with reasonable accuracy at any time the financialposition of the Company and the Group and to enable them toensure that the financial statements comply with the CompaniesAct 1985.

They are also responsible for taking reasonable steps to safeguardthe assets of the Group and for taking reasonable steps for theprevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity ofthe Group’s website. Financial information published on the websiteis based on legislation in the United Kingdom governing thepreparation and dissemination of financial statements that maydiffer from legislation in other jurisdictions.

Going concernThe Directors have a reasonable expectation that the Group hasadequate resources to continue in operational existence for theforeseeable future and therefore continue to adopt the goingconcern basis in preparing the accounts.

AuditorsThe Company’s auditors, PricewaterhouseCoopers LLP, haveexpressed their willingness to continue in office and resolutions fortheir re-appointment and to authorise the Directors to determinetheir remuneration will be proposed at the forthcoming AGM.

Approved by the Board of Directors and signed on its behalf

Amanda MassieGroup Company Secretary19 July 2004

32 WS Atkins plc Annual Report 2004

Corporate governance report

The Company is committed to the principles of good corporategovernance contained in the Combined Code on CorporateGovernance which is appended to the Listing Rules of the FinancialServices Authority.

The Board undertook a complete review of its corporate governanceframework following the publication of the new Combined Code in July 2003 (the new Combined Code) to ensure that it couldcontinue to uphold the principles of good governance to enable it to fulfil the Group’s corporate responsibilities and achieve itsfinancial objectives.

This report sets out the Company’s compliance with both thecurrent and the new Combined Codes.

Statement of compliance with the Combined CodeThe Company has complied with the provisions set out in Section 1of the June 1998 Combined Code and the provisions of the newCombined Code throughout the year ended 31 March 2004 exceptfor the period until 1 October 2003 when the roles of Chairmanand Chief Executive were temporarily combined as an interimmeasure pending the appointment of Keith Clarke. In addition,following the retirement of Frances Heaton on 16 September 2003and prior to the appointment of Lord Boyce and Sir Peter Williamsas Non-Executive Directors on 5 May 2004, the Audit andRemuneration Committees temporarily consisted of two Non-Executive Directors.

Board and Committee structureBoardThe Board of Directors is the body responsible for corporategovernance, for establishing policies and objectives and for thestewardship of the Group’s resources. It is the Group’s policy thatthe roles of Chairman and Chief Executive are separate, with theirroles and responsibilities clearly defined and recorded. Currently the Board is made up of the Chairman, three Executive Directors and five Non-Executive Directors. Struan Robertson is the SeniorIndependent Director. The biographies of the Directors as at thedate of this report are given on page 28.

It is the opinion of the Board that the Non-Executive Directors areindependent of management and have no business or otherrelationship which could interfere materially with the exercise oftheir judgement.

The Board has a regular schedule of meetings together with furthermeetings when required. In addition, Directors meet as members ofrelevant Committees. There is a formal schedule of matters reservedspecifically to the Board for decision and delegating specificresponsibilities to Committees.

The formal schedule of matters reserved for the Board includesstrategy, the approval of financial statements and shareholdercirculars, treasury policy, major capital investments, riskmanagement strategy and acquisitions and disposals.

The Non-Executive Directors meet with the Chairman separatelyduring the year.

All Directors have access to the advice and services of the GroupCompany Secretary, who is responsible for ensuring that Boardprocedures and applicable rules and regulations are observed. There is an agreed procedure for Directors to obtain independentprofessional advice, paid for by the Group.

In accordance with the Company’s Articles of Association, one thirdof the Board is required to retire by rotation each year. In addition,all those appointed during the year will stand for re-election at thenext General Meeting, ensuring that each Board Member faces re-election at regular intervals.

ChairmanMichael Jeffries, the Chairman, normally spends two days per weekon the business of the Group. His other significant commitmentsare disclosed in his biography on page 28. The Board considers thatthese commitments do not hinder his ability to discharge hisresponsibilities to the Company effectively.

Committees of the BoardThe Board’s Committees meet regularly to enable them to dischargetheir responsibilities. Each Committee has formal Terms ofReference which are reviewed annually by the Board. Copies areavailable on request from the Company Secretary or on the Group’swebsite www.atkinsglobal.com. Following formal decision makingthe Board may, on occasion, delegate authority to a committeeconsisting of any two Directors to facilitate final sign off for a courseof action within agreed parameters.

Group ExecutiveThe Group Executive meets regularly throughout the year, at leastten times. It is responsible for the management of the business andis chaired by the Chief Executive. Its members currently comprisethe Group Finance Director, the Managing Directors of the businessunits, the Human Resources Director and the Group CompanySecretary.

The respective roles of the Board and Group Executive are discussedfurther under Internal control on page 34.

Audit CommitteeThe Audit Committee comprises James Morley, Struan Robertsonand Sir Peter Williams, all independent Non-Executive Directors.James Morley, a Chartered Accountant, is Chairman of theCommittee. Sir Peter Williams was appointed as a member of theCommittee on 5 May 2004. Frances Heaton was Chairman of theCommittee until her retirement from the Board on 16 September2003. The Board considers all members to have recent and relevantfinancial experience

The Committee’s central functions are to review the scope of theexternal audit, to receive direct reports from the external andinternal auditors and to review the half yearly and annual financialstatements before they are presented to the Board, focusing inparticular on accounting policies and compliance, areas ofmanagement judgement and estimates, and the effectiveness of internal control procedures.

33WS Atkins plc Annual Report 2004

The key elements of processes used by the Audit Committee toreview the effectiveness of the system of internal control include:• discussion with management on risk areas identified by

management and/or the audit process;• review of internal and external audit plans;• review of significant issues arising from internal and external

audits; and• review of significant Group risks reported by the Group Risk

Committee.

The Committee is responsible for the review of the Company’swritten procedures for responding to the allegations ofwhistleblowers.

The Audit Committee’s Terms of Reference address the provisions inthe Combined Code in relation to audit committees and auditors.The Board and the Audit Committee monitor the cost effectivenessof audit and non-audit work performed by the external auditorsand also consider the potential impact, if any, on the corporaterelationship with the auditors before awarding any non-audit work.The Board and Audit Committee also review the independence of the external auditors.

The external auditors continue to operate procedures to safeguardagainst the possibility that the auditors’ objectivity and independencecould be compromised. This includes the use of independentconcurring partners, use of a technical review board (whereappropriate) and annual independence confirmations by all staff.The auditors report to the Audit Committee on matters includingindependence and non-audit fees on an annual basis. In addition,the role of the audit partner is rotated on a periodic basis.

Nomination CommitteeThe Nomination Committee comprises Michael Jeffries, Lord Boyce,Christopher Kemball, James Morley, Struan Robertson and Sir PeterWilliams. The Committee is chaired by Michael Jeffries except whenhis own succession is being discussed at which time StruanRobertson chairs the Committee as Senior Independent Director.Lord Boyce and Sir Peter Williams were appointed as members ofthe Committee on 5 May 2004. Frances Heaton was a member ofthe Committee until her retirement from the Board on 16 September2003. The Committee is responsible for nominating candidates forappointment to the Board.

During the year the Nomination Committee recommended theappointment of two new Non-Executive Directors. Lord Boyce and Sir Peter Williams were appointed on 5 May 2004. Theappointments aim to widen the skill set of the Board. TheCommittee used an external search consultancy to assist in makingrecommendations. The Committee makes regular appraisals of theprocesses in place for succession planning in respect of both Boardand senior appointments.

All Non-Executive Directors are advised of the time commitmentconsidered necessary to enable them to fulfil their responsibilitiesprior to appointment.

Remuneration CommitteeThe Directors’ Remuneration report on page 36 includes details ofthe Remuneration Committee and its work.

Board and Committee attendance The following table details the number of Board and Committeemeetings held during the year ending 31 March 2004 and theattendance record of each Director.

Board meetings Committee meetingsScheduled Committee(6) Audit Remuneration Nomination

Number of meetings held in year 12 25 5 8 5

Stephen Billingham 12 21 5(4) n/a 2(4)

Keith Clarke(1) 6 11 3(4) 3(4) 3

Michael Jeffries 12 14 4(4) 7(4) 2

Frances Heaton(2) 4 1 3 5 n/a

Christopher Kemball 9 n/a 1(4) 1(5) 4

Paul Marsh(3) n/a n/a n/a n/a n/a

James Morley 10 4 5 6 2

Struan Robertson 12 2 4 8 5

(1) Mr Clarke has attended all Board meetings since being appointed as a Director on 1 October 2003.

(2) Mrs Heaton retired from the Board on 16 September 2003.(3) Mr Marsh resigned from the Board on 10 April 2003.(4) Attendance for parts of the meeting was at the request of the Committee.(5) Mr Kemball attended the meeting as Mr Morley’s alternate.(6) A committee set up by the Board to provide final sign off for a course

of action agreed in a scheduled Board meeting.

Board performance evaluation and trainingThe Board, as part of its commitment to ensuring effectiveness andevaluating its performance together with that of its Directors andCommittees, appointed external consultants to assist in a formalevaluation process. This evaluation, which in future will be carried out annually, consisted of interviews with and questionnaires of allExecutive and Non-Executive Directors, the Group CompanySecretary and selected key Senior Managers. All necessary actions are being implemented following a full Board appraisal of thefindings. The appointments of Lord Boyce and Sir Peter Williams took place following the completion of this evaluation process.

The Non-Executive Directors have met alone to appraise theChairman’s performance.

The Company has a continuing professional development framework to assist the Chairman, Executive Directors and Non-Executive Directors in discharging their responsibilities effectively.Non-Executive Directors meet regularly with members of the GroupExecutive and receive regular business updates via scheduledpresentations. These, coupled with site visits, ensure Non-ExecutiveDirectors gain first hand experience of developments within theGroup. External training is provided as necessary.

34 WS Atkins plc Annual Report 2004

Corporate governance reportcontinued

Internal controlThe Board has accountability for reviewing and approving theadequacy and effectiveness of internal controls operated by theGroup, including financial, operational and compliance controls andrisk management. It is the role of management to implement theagreed policies on risk and control.

The system of internal financial and operational controls is designedto meet the Group’s particular needs and aims to facilitate effectiveand efficient operations, to safeguard the Group’s assets, ensureproper accounting records are maintained and ensure that thefinancial information used within the business and for publication is reliable. The Group’s risk management process identifies the keyrisks facing each business and reports to the Board on how thoserisks are being managed.

Such a system of internal control can only be designed to managerather than eliminate risk of failure to achieve business objectivesand can provide reasonable, but not absolute, assurance againstmaterial misstatement and loss.

The Board confirms that there is a continuing process foridentifying, evaluating and managing the risks faced by the Groupand that the process has been in place for the year under reviewand remains current. This process covers subsidiaries in which theGroup has an interest of 50% or more. Joint Ventures in which theGroup does not have overall control are not treated, for thesepurposes, as part of the Group. For these Joint Ventures, systems of internal control are applied as agreed between the parties to theventure. For Metronet the Board has separately reviewed the risksfaced by the Group.

The Audit Committee has reviewed the operation and effectivenessof the Group’s internal controls, which operated during the periodcovered by the Directors’ report and financial statements, up to andincluding the date of approval by the Board.

Key features of the system of the Group’s internal control are as follows:

Group organisation and cultureBy its statements and actions the Board emphasises a culture ofintegrity, competence, fairness and responsibility.

The Board focuses mainly on strategic issues, senior managementand financial performance. The Group Executive concentrates onoperational performance, operational decision making and theformulation of strategic proposals to the Board. The ManagingDirectors of the business units manage their businesses with thesupport of senior managers. The Board determines how the GroupExecutive and the individual businesses operate within a frameworkof delegated authorities and reserved powers which seek to ensurethat certain transactions, significant in terms of their size or type, areundertaken only after high level review.

Control environmentThe Group’s operational structure has clearly documented andcommunicated principles of delegation of authority and segregationof duties. The Group’s management systems include financialpolicies and procedures, corporate and business quality assurancemanuals, health and safety procedures and environmentalmanagement procedures. These procedures are subject to review to ensure that improvements to enhance controls can be made.

Financial reportingThe Board approves a business plan and annual budgets forindividual business units and the Group. The financial performanceof individual business units is reported regularly and compared toannual budgets. The Group reports to shareholders on a half-yearlybasis. Forecasts for the Group are updated and reviewed by theBoard regularly.

Project and contract controlProcedures seek to ensure that risks are identified through theproject lifecycle from bidding to completion. Regular reviewprocedures are in place to ensure that issues are appropriatelyreported to the Board. A Commercial Risk and Audit Framework is in place which requires peer review to be carried out for allsignificant bids and opportunities or where significant investmentdecisions have to be taken.

Individual business controlsIndividual businesses and central corporate functions complete anannual self-certification statement. Responsible managerspersonally confirm the adequacy of their systems of internal controland their compliance with Group policies. The statement alsorequires the reporting of any significant control issues that haveemerged so that areas of Group concern may be identified,addressed and experience shared.

Functional speciality reportingThe Board assesses the risks facing the business on an ongoing basis and has identified a number of key areas which are subject to regular reporting to the Board such as human resources, healthand safety, environment, equity investments and treasury.

Risk management reviewThe Board assesses risk management throughout the Group, aidedby the Group Risk Committee and detailed reviews of internalcontrols and risk management. The Group Risk ManagementFramework requires businesses to record formally all significant risksfacing their business and detail the steps being taken to avoid ormitigate those risks. A summary of the key risks facing the Group isplaced on risk registers which are reviewed regularly by the Board.

The Group maintains insurance policies to provide protection fromlosses arising through claims from clients. The adequacy of theGroup’s insurance cover is reviewed by the Board annually.

35WS Atkins plc Annual Report 2004

Internal AuditThe Internal Audit function undertakes a programme to addressinternal control and risk management processes with particularreference to the Turnbull report. Its conclusions are communicatedto the relevant level of management and the function has a directreporting responsibility to the Audit Committee acting on behalf ofthe Board.

Investor relationsThe Board gives communication with all shareholders a high priority.The Annual and Interim Reports are sent to all shareholders and allshareholders are invited to the Company’s AGM, which is attendedby the full Board.

The Group’s website contains information on current activities,including recordings of the Annual and Interim results presentationsto City analysts and institutional investors.

The Board welcomes the views of all shareholders. The Chairmanmaintains contact with major shareholders and recently wrote tothem to set out the Company’s commitment to open, on-goingdialogue. Both the Chairman and the Senior Independent Directorwill make themselves available for the regular investor meetingsheld by the Chief Executive and Group Finance Director if they arerequested to do so. A wide range of relevant issues are discussed at investor meetings including strategy, performance, managementand corporate governance. Non-Executive Directors are keptinformed of the views of shareholders by the Chairman and theExecutive Directors provide reports to them on investor meetings.The Company’s brokers provide briefings to the Board onshareholder opinion and compile independent feedback frominvestor meetings.

The annual report is designed to present a balanced andunderstandable view of the Group’s activities and prospects. TheChairman’s statement, Chief Executive’s review of operations andthe Financial review on pages 14 to 27 provide an assessment of the Group’s affairs and position and will be supported by a presentation to be made at the AGM.

Approved by the Board of Directors and signed on its behalf

Amanda MassieGroup Company Secretary19 July 2004

36 WS Atkins plc Annual Report 2004

Remuneration report

IntroductionThis report has been prepared in accordance with the Directors’Remuneration Report Regulations 2002. As required by theRegulations, a resolution to approve the report will be proposed at the AGM of the Company at which the financial statements willbe presented for approval.

The Regulations require the auditors to report to the Company’smembers on the “auditable part” of the Directors’ Remunerationreport and to state whether in their opinion that part of the reporthas been properly prepared in accordance with the Companies Act1985 (as amended by the Regulations). The report has thereforebeen divided into separate sections for audited and unauditedinformation.

Unaudited informationRemuneration CommitteeThe Company’s Remuneration Committee comprises StruanRobertson, James Morley and Lord Boyce, all independent Non-Executive Directors. The Committee is chaired by Struan Robertson.Lord Boyce was appointed as a member of the Committee on 5 May 2004. Frances Heaton was also a member of the Committeeuntil her retirement from the Board on 16 September 2003.

The Remuneration Committee reviews, on behalf of the Board, theremuneration policy for the Chairman and Executive Directors and,more generally, the remuneration policy of the Group. TheCommittee determines the level of remuneration, incentives andother benefits, compensation payments and terms of employmentof the Chairman and each Executive Director. The Committee seeksto provide appropriate incentives to enhance performance and alignthe interests of the Executive Directors with those of shareholders.The Committee also reviews the salaries and benefits of the GroupCompany Secretary and key Senior Managers reporting directly to the Chief Executive.

In determining the Directors’ remuneration for the year, theCommittee consulted the Chief Executive, the Human ResourcesDirector and, where required, the Group Company Secretary aboutits proposals. No Director or Senior Manager attends meetings atwhich his own remuneration is under consideration.

The Committee appointed, and continues to use, New Bridge StreetConsultants LLP to provide advice on structuring executiveremuneration packages. New Bridge Street Consultants LLP do not provide any other services to the Group. Clifford Chance LLPprovides legal advice on incentive schemes when required.

Remuneration policyThe objectives of the Group’s remuneration policy are to attract,retain and incentivise management with the appropriateprofessional, managerial and technological expertise to realise theGroup’s business objectives and to align their interests with those ofshareholders. The Group strives to link payment to performanceand thereby create a performance culture.

The Committee, following a complete review of remunerationduring 2003, continues to monitor the following constituentelements to ensure that they offer the best available incentive toExecutive Directors and key Senior Managers to enhanceshareholder value:• basic salary and other benefits;• performance bonus payable for the achievement of in-year targets;• long term share incentives; and• retirement benefits.

The Company’s bonus and long term incentive plans provideExecutive Directors and key Senior Managers with the opportunityto increase overall remuneration levels to the upper quartile forcomparable businesses but only following the achievement ofdemanding performance targets.

Basic salary and other benefitsThe Committee monitors the salary levels for the Chairman,Executive Directors and key Senior Managers against those paid in the market annually, taking account of the size and range ofresponsibilities held.

The Committee has supported the Chief Executive’s drive towardsperformance based pay by resolving to keep salaries for the yearending 31 March 2005 unchanged for the Executive Directors and certain key Senior Managers, replacing pay increases with a Performance Salary Incentive (PSI).

PSI will pay a cash bonus subject to exceeding budgeted Grouptargets and is therefore self-funding. Potential PSI bonuses willrange from 0-12% of basic salary depending on performanceagainst targets. The PSI is non-contractual and non-pensionable.

Other benefits for Executive Directors include a car allowance or acar and payment of its operating expenses and fuel, life assuranceand entitlement to a non-contributory private health care scheme.

37WS Atkins plc Annual Report 2004

Performance bonus paymentsExecutive Directors are eligible to receive a bonus of up to 60% oftheir basic salary and PSI for achieving Group financial and individualperformance targets. The targets against which bonuses are paid,which include non-financial targets relating to management ofissues such as health and safety, are reviewed annually by theRemuneration Committee. In exceptional circumstances, theCommittee may increase the bonus to pay out up to 80% of basic salary and PSI.

Key Senior Managers are also eligible to receive a bonus for theachievement of Group, business unit and personal targets.

Executive Directors and key Senior Managers are required to take a minimum of one-third of any bonus exceeding £15,000 in theform of an award over shares, under the terms of the WS AtkinsDeferred Bonus Plan. The first awards under the Plan to ExecutiveDirectors were made on 25 June 2004. The Plan is designed to aid retention, with the award being subject to forfeiture onresignation within three years from grant. There are no furtherperformance conditions once the award has been made.

Bonus awards are non-pensionable and non-contractual.

Long term share incentivesAt the AGM held on 16 September 2003 shareholders approvedmodifications to an existing long term share incentive scheme,which was renamed the WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan (LTIP).

The performance condition of the LTIP is total shareholder return(TSR) with an earnings per share (EPS) underpin measured overthree financial years starting with the financial year beginningimmediately after the award is granted. Full vesting of any awardwill take place for a top 20% ranking against a group of up to 16 comparator companies, 30% for a median ranking and noaward if TSR falls below the median. The EPS underpin is the UK Retail Price Index (RPI) plus 2% per annum.

The Remuneration Committee chooses appropriate comparatorcompanies for each year’s grant. The comparator companies for the2004 grant included AEA Technology plc, Amec plc, WS Atkins plc,Balfour Beatty plc, Capita plc, Carillion plc, Interserve plc, Jarvis plc,Kier plc, McAlpine plc, Mouchel Parkman plc, Mowlem plc, RPSGroup plc, Serco plc and WSP Group plc (with a discretion for theRemuneration Committee to add or remove companies to takeaccount of change in circumstances). The RemunerationCommittee reviews the comparator group of companies annually.

The Committee considers that the combination of TSR and EPSensures that management is rewarded for delivering both absoluteand relative growth performance against similar companies.

Awards made under this plan prior to its amendment on 16 September 2003 have a different performance condition. Theseawards require the increase in EPS to be more than 12% perannum above the UK RPI in the relevant three year performanceperiod to enable all of the ordinary shares to be acquired, but if theEPS growth is less than 5% per annum above the UK RPI then noneof the ordinary shares can be acquired. A sliding scale in relation to the number of ordinary shares that may be acquired operates for growth in EPS between 5% and 12% above the UK RPI.

All-employee share plansShareholders gave approval for a Share Incentive Plan (SIP) on8 August 2000. The Plan, which is approved by the Inland Revenue,was not operated in the year ending 31 March 2004. The Companyplans to implement the SIP for all UK employees in November 2004in place of the UK Sharesave Scheme. All UK employees and theExecutive Directors will be eligible to participate in the SIP.

The Company will seek shareholder approval at the forthcomingAGM to update the rules of the SIP in line with current marketpractice. A full explanation of the amendment can be found in theNotice of Meeting.

An International Sharesave scheme for non-UK resident employeesis operated in some countries. An Employees’ Stock Purchase Planhas been operated in previous years in the USA. It is not intended to grant options under these schemes during the year ending 31 March 2005.

Summary of closed share plansExecutive Directors continue to participate in the Equity ParticipationPlan (EPP), which has now been closed to new grants. The EPP was designed to encourage participants to invest in the Group bytaking all or part of their bonus in the form of ordinary shares or a right to acquire ordinary shares, which if retained for a three yearperiod, gave participants a right to obtain a matching number ofordinary shares. The right to the matching ordinary shares is subjectto performance conditions similar to those in the LTIP prior toamendment on 16 September 2003.

Retirement benefitsPension and retirement benefits provided to the Chairman andExecutive Directors are comparable to those provided by othercompanies.

The pension arrangement provided for Stephen Billingham is withinthe WS Atkins Staff Retirement Benefits Plan (the Plan) which isapproved by the Inland Revenue. The Plan is administered by aboard of Trustees. He is a member of a defined benefit section ofthe Plan, which provides a 40ths accrual rate of pensionable payand has a normal retirement age of 60. His pension is subject to the Inland Revenue earnings cap.

As from 1 April 2003, the pension benefits in respect of MichaelJeffries are being provided under an Executive Pension Plan on a defined contribution basis.

Keith Clarke’s pension benefits are made on a defined contributionbasis and are being provided under an individual Stakeholderarrangement.

38 WS Atkins plc Annual Report 2004

Remuneration reportcontinued

Performance graphThe following graph shows the Company’s performance, measuredby total shareholder return (TSR), compared with the performance of the FTSE 250 Index excluding investment trusts over the past fiveyears. This is considered the most appropriate index against which to measure performance as the Company has been a member ofthe FTSE 250 for the majority of the five year period. The Companyhas outperformed the FTSE 250 for most of the past five years.

TSR is defined as the return shareholders would receive if they held a notional number of shares and received dividends on those sharesover a period of time. Assuming dividends are re-invested into theGroup’s shares, it measures the percentage growth in the Group’sshare price together with the value of any dividends paid.

Directors’ contractsThe Service Agreements of the Chairman and Executive Directors are summarised in the table below:

Date of NoticeName of Director contract period

Stephen Billingham 2 October 2002 12 monthsKeith Clarke 12 September 2003 12 monthsMichael Jeffries 9 July 1996 12 monthsRobert MacLeod 14 July 2004 12 months

The notice period for Keith Clarke and Robert MacLeod is 12 months.Notice may not be served by the Company for any reason other thanunsatisfactory performance by Mr Clarke during the first 12 monthsof his employment. In the event of unsatisfactory performance, thenotice period for Mr Clarke and Mr MacLeod is reduced to 3 months.Both Service Agreements include a duty to mitigate loss where theAgreement is terminated and any payment in lieu of notice may bereduced to take account of such mitigation.

The Service Agreements of Stephen Billingham, Keith Clarke,Michael Jeffries and Robert MacLeod do not provide forpredetermined amounts of compensation in the event of earlytermination of their service contracts.

The Service Agreements of the Chairman and the Executive Directorswill terminate when the Director reaches the age of 60 and areotherwise terminable on giving 12 months notice. Copies of eachDirector’s Service Agreement will be available for inspection prior to and during the AGM.

Non-Executive DirectorsThe Non-Executive Directors have letters of appointment statingtheir annual fee and that their appointment is initially for a term ofthree years subject to satisfactory performance and their re-electionat forthcoming AGMs. Their appointment may be terminated withsix months written notice at any time. The table below summarisesthe dates of appointment and most recent re-election dates for eachof the Non-Executive Directors:

Date of Date of lastappointment as a re-election at

Name of Director Non-Executive Director Annual General Meeting

Lord Boyce 5 May 2004 n/a(3)

Frances Heaton(1) 1 April 1990 1 October 2002Christopher Kemball 14 May 2002 1 October 2002Paul Marsh(2) 14 May 2002 1 October 2002James Morley 1 January 2001 16 September 2003Struan Robertson 1 August 2000 7 August 2001Sir Peter Williams 5 May 2004 n/a(3)

(1) Frances Heaton retired as a Director on 16 September 2003.(2) Paul Marsh resigned as a Director on 10 April 2003.(3) Lord Boyce and Sir Peter Williams will stand for re-election at the AGM

to be held on 7 September 2004.

The remuneration of the Non-Executive Directors is determined bythe Board within the limits set out in the Articles of Association andon the basis of independent advice and the level of fees paid to Non-Executive Directors of comparator companies. Shareholders will be asked to approve an increase in this limit (fixed since 1996) at the forthcoming AGM. The annual fees are specific to eachDirector reflecting their individual commitments to the Board andvarious Board committees. Non-Executive Directors are not eligiblefor pensions, share incentives, annual bonus or any similar paymentsother than out-of-pocket expenses in connection with theperformance of their duties. Each Non-Executive Director withdrawsfrom the meeting at which discussions in respect of matters relatingto their own position take place.

0

20

40

60

80

100

120

140

160

180

200

1999 2000 2001 2002 2003 2004

AtkinsFTSE 250

39WS Atkins plc Annual Report 2004

Audited informationDirectors’ emolumentsThe aggregate emoluments in respect of their roles as Directors, excluding pensions, of the Directors of the Company who served duringthe year:

Salary/ Bonus and Other Other Non-cash fees profit share(5) benefits(6) payments emoluments Total(12)

£000 £000 £000 £000 £000 £0002004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003

Executive DirectorsStephen Billingham 242 113 152 2 12 6 50(8) – – 140(11) 456 261Keith Clarke(1) 208(4) – 60 – 2 – 150(9) – 40(10) – 460 –Michael Jeffries 318 238 154 251 3 18 – – – – 475 507

Total Executive Directors 768 351 366 253 17 24 200 – 40 140 1,391 768

Non-Executive DirectorsFrances Heaton(2) 24 36 – – 1(7) 2 – – – – 25 38Christopher Kemball 34 25 – – – – – – – – 34 25Paul Marsh(3) – 20 – – – – – – – – – 20James Morley 34 28 – – – – – – – – 34 28Struan Robertson 38 31 – – – – – – – – 38 31

Total Non-Executive Directors 130 140 – – 1 2 – – – – 131 142

(1) Keith Clarke was appointed a Director on 1 October 2003.(2) Frances Heaton retired as a Director on 16 September 2003.(3) Paul Marsh resigned as a Director on 10 April 2003.(4) Mr Clarke has a contractual entitlement to receive 25% of salary as a pension payment. £20,276 of the total ‘salary/fees’ payment is in respect of the

entitlement which could not be paid into his individual Stakeholder arrangement as a result of the Inland Revenue’s earnings cap.(5) Bonus and profit share refers to amount payable in cash.(6) Other benefits include such items as company cars, fuel and medical insurance.(7) Other benefits relate to the re-imbursement of business expenses to Francis Heaton.(8) Other payments relate to the payment of a separate bonus of £50,000 to Stephen Billingham in respect of his secondment to Metronet.(9) Other payments of £150,000 relate to a payment agreed in Keith Clarke’s Terms and Conditions of employment upon joining the Company.(10)Keith Clarke was required to take a minimum of one-third of his bonus in the form of a right to acquire shares under the WS Atkins Deferred Bonus Plan

(DBP). Prior to 31 March 2004 he elected to receive 40% of his bonus as a right to acquire shares. An award of shares to an aggregate value of £40,000was granted on 25 June 2004 based on the closing mid-market price on 24 June 2004. This translates into an option over 6,849 shares subject to theterms of the DBP.

(11) Stephen Billingham elected to take his bonus in the form of a right to acquire shares under the WS Atkins Pre-Tax Equity Participation Plan (Pre-Tax EPP).(12) Total excludes pension contributions which are detailed under the heading Directors’ retirement benefits below.

Additional notesRic Piper, who resigned as a Director on 1 October 2002, received a payment of £5,992.49 during the year. This amount, which is equivalent to the amount ofdividends paid per share in the financial years up to the exercise date, became payable to him following the exercise of his Bonus Award granted under theterms of the Pre-Tax EPP.

Robin Southwell, who resigned as a Director on 30 September 2002, received a payment of £406.39 during the year. This amount, which is equivalent to theamount of dividends paid per share in the financial years up to the exercise date, became payable to him following the exercise of his Bonus Award grantedunder the terms of the Pre-Tax EPP. As disclosed in last year’s remuneration report, prior to the termination of his employment on 30 September 2002, RobinSouthwell had made a personal investment of 48,321 ordinary shares in the acquisition of deposited shares under the Geared Option Scheme. The rules wereadjusted so that these deposited shares were not automatically forfeited on termination of his employment. The deposited shares remain subject to risk offorfeiture but will be released in full if the Company’s share price recovers to the amount originally paid by Robin Southwell, namely 675 pence. The note in last year’s remuneration report is amended accordingly.

Robert MacLeod, who was appointed a Director on 23 June 2004, will receive an annual salary of £180,000 and be subject to the Group’s existingremuneration policy.

40 WS Atkins plc Annual Report 2004

Remuneration reportcontinued

Directors’ retirement benefitsAll Executive Directors receive life assurance cover equal to four times basic salary.

In the event of death whilst in employment, Stephen Billingham’s spouse, in addition to the above life assurance cover, would receive a pension equal to half of his pension entitlement based on his completed pensionable service to date of death, plus a service uplift of thelesser of future service to age 60 and 10 years. Children’s allowances would be paid in addition where they were in full time education. In the event of his early retirement through ill health, a pension may become payable at the discretion of the Trustees of the Plan. Anyretirement, spouse’s pensions or children’s allowances would be increased in line with RPI subject to a maximum of 5% per annum.

The amounts below show the pension entitlement that would be paid annually on retirement based on service to the end of the year.

Accrued Accrued Increase in Accrued Increase in Accruedentitlement entitlement accrued benefit transfer value Member transfer value transfer value

Years of at year end at year end during the year at year end contributions net of member at year endAge at service at 31.03.04 31.03.03 ended 31.03.04 31.03.04 during year contributions 31.03.03

Name 31.03.04 31.03.04 £000 p.a. £000 p.a. £000 £000 £000 £000 £000

Stephen Billingham(1) 45 3 8 6 2 50 4 24 22Keith Clarke(2) 51 0(3) – – – – – – –Michael Jeffries(4) 59 28 – 196 – – – – 3,851

(1) Stephen Billingham paid contributions of 5% of his pensionable salary. Following a review of the pension arrangements this was increased to 6% as from 1 April 2004.The benefits shown above exclude any arising from additional voluntary contributions.The increase in benefits excludes inflation in the year. The transfer values have been calculated on the basis of actuarial advice in accordance with the Actuarial Guidance Note GN11. The transfer values represent the value of assets the pension Plan would need to transfer to another pension arrangement in order to eliminate the Plan’s liability in respect of his pension liability. They do not represent sums payable to the Director and therefore cannot be added meaningfully to annual remuneration.

(2) Keith Clarke participates in a personal Stakeholder arrangement to which the Company’s contribution was £24,724 (2003: Nil). Mr Clarke has a contractual entitlement to receive an amount equivalent to 25% of salary as a pension payment. £20,276 of his entitlement could not be paid to his personal Stakeholder Plan as a result of the Inland Revenue’s earnings cap. This sum was therefore paid to him as an additional emolument and is reported in the Directors’ emoluments table on page 39.

(3) Keith Clarke had completed six months’ service as at 31 March 2004.(4) The pension benefits in respect of Michael Jeffries are now provided via an Executive Pension Plan on a defined contribution basis with the Group agreeing

to make payments of £100,000 per annum.

In addition to the above the Company has an unfunded pension commitment in respect of Ric Piper who left service on 1 October 2002. On an actuarialmarket value basis this had an accumulated value of £363,000 (2003: £244,220).

Robert MacLeod has a contractual entitlement to receive an annual amount equivalent to 25% of basic salary towards his own personal pension with effectfrom 23 June 2004.

Directors’ interestsThe beneficial interest of the Directors and their families in the ordinary shares of 0.5p each in the Company as at 31 March 2004 were as follows:

At 31.03.04 or At 31.03.03 or at date of termination at date of appointment

Executive DirectorsStephen Billingham – –Keith Clarke 19,500 14,500Michael Jeffries 623,657 623,604

643,157 638,104

Non-Executive DirectorsFrances Heaton 45,300 45,300Christopher Kemball 10,000 –Paul Marsh 1,557 1,557James Morley 1,250 1,250Struan Robertson 3,396 984

61,503 49,091

Total 704,660 687,195

On appointment Lord Boyce had a beneficial interest in 846 ordinary shares of 0.5 pence each, and Robert MacLeod had a beneficialinterest in 10,000 ordinary shares of 0.5p each. Sir Peter Williams does not have any interest in shares.

There were no changes in Directors’ interests between 31 March 2004 and 19 July 2004.

As at 31 March 2004, each of the Directors was deemed to be interested as a potential beneficiary under the Employee Benefit Trusts in 5,490,957 ordinary shares of 0.5 p each (2003: 6,381,385). Details of the Directors’ personal interests in the EBTs are given on page 41.

41WS Atkins plc Annual Report 2004

Directors’ share options and long term incentivesAggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the Companygranted to or held by the Directors.

No. of No ofshares sharesunder under

option at option at Mid01.04.03 31.03.04 marketor date of or at Market price at First Date of

Scheme Award appoint- date of Option price on date of Gain on date of lapse of Name Name(2) date ment Granted Exercised Lapsed termination price exercise grant exercise exercise option

Stephen Billingham EPP – Bonus 18/07/01 788 – – – 788 0.0p – 782.5p – 18/07/04 18/07/08

EPP – Matching(1) 18/07/01 788 – – 552(4) 236 0.0p – 782.5p – 18/07/04 18/07/08LTIP(1) 18/07/01 12,012 – – 8,409(5) 3,603 0.0p – 782.5p – 18/07/04 18/07/08SAYE 06/07/01 186 – – – 186 666.0p – 807.5p – 01/09/04 01/03/05SAYE 22/08/02 161 – – – 161 259.2p – 287.5p – 01/11/05 01/05/06EPP – Bonus 30/06/03 – 49,382 – – 49,382 0.0p – 293.5p – 30/06/06 30/06/13EPP – Matching(1) 30/06/03 – 49,382 – – 49,382 0.0p – 293.5p – 30/06/06 30/06/13LTIP(1) 30/06/03 – 81,236 – – 81,236 0.0p – 293.5p – 30/06/06 30/06/13LTIP(1) 17/09/03 – 30,000 – – 30,000 0.0p – 401.5p – 01/04/07 17/09/13

Total 13,935 210,000 – 8,961 214,974 –

Keith Clarke(3) LTIP(1) 01/10/03 – 95,000 – – 95,000 0.0p – 401.5p – 01/04/07 01/10/13

Total – 95,000 – – 95,000 –

Michael Jeffries EPP – Bonus 18/07/01 8,258 – – – 8,258 0.0p – 782.5p – 18/07/04 18/07/08

EPP – Matching(1) 18/07/01 8,258 – – 5,781(4) 2,477 0.0p – 782.5p – 18/07/04 18/07/08LTIP(1) 21/09/01 53,932 – – 37,753(5) 16,179 0.0p – 667.5p – 21/09/04 21/09/08LTIP(1) 30/06/03 – 191,816 – – 191,816 0.0p – 293.5p – 30/06/06 30/06/13

Total 70,448 191,816 – 43,534 218,730 –

Aggregate gains on share options 2004 –

Aggregate gains on share options 2003 35,828

(1) Subject to performance criteria described on page 37.(2) Scheme names: EPP – WS Atkins Pre-Tax Equity Participation Plan.

SAYE – Savings related share option scheme (Sharesave).LTIP – WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan (formerly the WS Atkins 1997 Senior Executive Long Term Incentive Plan).

(3) Awards were granted to Keith Clarke on 25 June 2004 based on the closing mid-market price on 24 June 2004 of 20,000 shares under the terms of the LTIP and 6,849 shares under the terms of the WS Atkins Deferred Bonus Plan (DBP).

(4) In accordance with the rules of the EPP, 70% of the matching award has lapsed due to the performance condition not being met in full.(5) In accordance with the rules of the LTIP, 70% of the award has lapsed due to the performance condition not being met in full.

Additional noteAwards were granted to Robert MacLeod on 25 June 2004 based on the closing mid-market price on 24 June 2004 of 30,000 shares under the terms of theLTIP, and 2,625 shares under the terms of the DBP. This increased his total interest in shares over which he holds options to 47,625.

For each share under option that had not expired at the end of the financial year, the market price at the 31 March 2004 was 587.0 penceand the highest and lowest market prices during the financial year were 605.0 pence and 136.5 pence respectively.

ApprovalApproved by the Board of Directors and signed on its behalf

Struan RobertsonChairman of the Remuneration Committee19 July 2004

42 WS Atkins plc Annual Report 2004

Auditors’ report

Independent auditors’ report to the members of WS Atkins plcWe have audited the financial statements which comprise theconsolidated profit and loss account, the consolidated balancesheet, the consolidated cash flow statement, the consolidatedstatement of total recognised gains and losses, the reconciliation of movements in Group shareholders’ funds, the company balancesheet and the related notes which have been prepared under thehistoric cost convention and the accounting policies set out in thestatement of accounting policies. We have also audited thedisclosures required by Part 3 of Schedule 7A to the Companies Act 1985 contained in the Remuneration report (the auditable part).

Respective responsibilities of Directors and auditorsThe Directors’ responsibilities for preparing the annual report, andthe consolidated financial statements in accordance with applicableUnited Kingdom law and accounting standards are set out in thestatement of Directors’ responsibilities. The Directors are alsoresponsible for preparing the Remuneration report.

Our responsibility is to audit the financial statements and theauditable part of the Directors’ remuneration report in accordancewith relevant legal and regulatory requirements and UnitedKingdom Auditing Standards issued by the Auditing PracticesBoard. This report, including the opinion, has been prepared for andonly for the Company’s members as a body in accordance withSection 235 of the Companies Act 1985 and for no other purpose.We do not, in giving this opinion, 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 expresslyagreed by our prior consent in writing.

We report to you our opinion as to whether the financialstatements give a true and fair view and whether the financialstatements and the auditable part of the Remuneration report havebeen properly prepared in accordance with the Companies Act1985. We also report to you if, in our opinion, the Directors’ reportis not consistent with the financial statements, if the Company andthe Group have not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’remuneration and transactions is not disclosed.

We read the other information contained in the annual report andconsider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with thefinancial statements. The other information comprises only theFinancial summary and Business Overview, Chairman’s statement,Chief Executive’s review of operations, Financial review, Report ofthe Directors, Corporate governance report and the unaudited partof the Remuneration report.

We review whether the Corporate governance statement reflectsthe Company’s compliance with the seven provisions of the June1998 Combined Code specified for our review by the Listing Rulesof the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or to form an opinion on the effectiveness of the Company’s and Group’s CorporateGovernance procedures or its risk and control procedures.

Basis of audit opinionWe conducted our audit in accordance with auditing standardsissued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amountsand disclosures in the financial statements and the auditable part ofthe Remuneration report. It also includes an assessment of thesignificant estimates and judgements made by the Directors in thepreparation of the financial statements, and of whether theaccounting policies are appropriate to the Company’s and theGroup’s circumstances, consistently applied and adequatelydisclosed.

We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonableassurance that the financial statements and the auditable part of the Remuneration report are free from material misstatement,whether caused by fraud or other irregularity or error. In formingour opinion we also evaluated the overall adequacy of thepresentation of information in the financial statements.

OpinionIn our opinion:• the financial statements give a true and fair view of the state

of affairs of the Company and the Group at 31 March 2004 and of the profit and cash flows of the Group for the year then ended;

• the financial statements have been properly prepared in accordance with the Companies Act 1985; and

• those parts of the Remuneration report required by Part 3 of Schedule 7A to the Companies Act 1985 have been properly prepared in accordance with the Companies Act 1985.

PricewaterhouseCoopers LLP Chartered Accountants and Registered AuditorsLondon19 July 2004

43WS Atkins plc Annual Report 2004

Consolidated profit and loss accountfor the year ended 31 March 2004

Restated(1)

2004 2003Notes £m £m

Turnover: Group and Share of Joint Ventures 1 1,241.8 1,012.2Less: Share of Joint Ventures’ turnover 4 (250.0) (76.9)

Turnover 991.8 935.3 Continuing operations 950.4 833.7 Discontinued operations 41.4 101.6

Cost of sales (619.2) (576.1)

Gross profit 2 372.6 359.2 Administrative expenses 2 (338.1) (409.2)

Non-exceptional (338.1) (361.1)Exceptional 3 – (48.1)

Operating profit/(loss): Group excluding share of Joint Ventures 2 34.5 (50.0)Continuing operations 35.6 (0.6)Continuing operations – Exceptional items – (24.7)Discontinued operations (1.1) (1.3)Discontinued operations – Exceptional items – (23.4)

Operating profit: Share of Joint Ventures 4 32.8 14.2

Operating profit/(loss): Group and Share of Joint Ventures 67.3 (35.8)

Profit on sale of subsidiary undertaking and Joint Ventures 3 13.5 –

Interest receivable and similar income 5 15.7 6.3 Operations 3.4 3.8 Joint Ventures 4 12.3 2.5

Interest payable and similar charges 6 (34.5) (15.8)Operations (10.0) (5.8)Joint Ventures 4 (24.5) (10.0)

Profit/(loss) on ordinary activities before taxation 62.0 (45.3)Operations before exceptional items 27.9 (3.9)Exceptional items 13.5 (48.1)Joint Ventures 4 20.6 6.7

Taxation on profit/(loss) on ordinary activities 8 (24.6) 7.3 Operations before exceptional items (17.4) 4.6 Exceptional items (1.1) 4.5 Joint Ventures 4 (6.1) (1.8)

Profit/(loss) on ordinary activities after taxation 37.4 (38.0)Operations before exceptional items 10.5 0.7 Exceptional items 12.4 (43.6)Joint Ventures 4 14.5 4.9

Dividends 9 (8.8) (2.8)

Retained profit/(loss) for the year transferred to reserves 28.6 (40.8)

Earnings per share: 11Basic 38.8p (41.1)pFully diluted 38.3p (41.1)pAdjusted (2) 39.9p 16.5p

Dividends per share: 9Interim – paid 2.0p –Final – proposed 7.0p 3.0p

Total for the year 9.0p 3.0p

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12. (2) Before amortisation of goodwill and pension fund (deficit)/surplus, exceptional items, Metronet bid costs, Colchester Garrison dilution gain and

Employee Benefit Trusts, see Note 11.

The Notes on pages 48 to 82 form part of these financial statements.

44 WS Atkins plc Annual Report 2004

Restated(1)

2004 2003Notes £m £m

Fixed assetsIntangible assets 13 36.8 49.5Tangible assets 14 56.9 65.4

Investments in Joint Ventures 4 25.9 19.5Share of gross assets 474.0 176.1Share of gross liabilities (448.1) (156.6)

119.6 134.4

Current assetsStocks 16 0.5 0.4Debtors 17 275.3 244.2Investments 18 30.0 7.5Cash at bank and in hand 30(c) 86.2 44.8

392.0 296.9

Current liabilitiesCreditors: amounts falling due within one year 19 (332.0) (302.5)

Net current assets/(liabilities) 60.0 (5.6)

Total assets less current liabilities 179.6 128.8

Creditors: amounts falling due after more than one year 20 (56.8) (51.1)Provisions for liabilities and charges 21 (34.1) (22.7)

Net assets 88.7 55.0

Capital and reservesCalled up share capital 23 0.5 0.5Share premium account 24 62.3 55.4Capital redemption reserve 24 0.2 0.2Merger reserve 24 8.7 8.7Profit and loss account 24 17.0 (9.8)

Shareholders’ funds – equity interests 88.7 55.0

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

Keith Clarke Stephen BillinghamDirector Director

Approved by the Board on 19 July 2004.

The Notes on pages 48 to 82 form part of these financial statements.

Consolidated balance sheetas at 31 March 2004

45WS Atkins plc Annual Report 2004

2004 2003Notes £m £m

Net cash inflow from operating activities 30(b) 94.4 26.6

Dividends received from Joint Ventures and Associates 2.9 6.5

Returns on investments and servicing of financeInterest received 3.5 3.3

Current asset liquid investments and other 3.2 2.6 Finance leases 0.3 0.7

Interest paid (8.0) (5.5)Bank loans, overdrafts and other (7.3) (5.0)Finance leases (0.7) (0.5)

Net cash outflow from returns on investments and servicing of finance (4.5) (2.2)

Taxation (3.1) (1.8)

Capital expenditure and financial investmentPurchase of fixed assets (7.6) (19.0)Disposal of fixed assets 1.4 1.3Purchases of own shares by Employee Benefit Trusts (0.1) (2.6)Disposal of other fixed asset investment – 1.2 Re-imbursement of bid costs and development fees: Metronet 20.1 –

Other 12.7 – Sales of own shares by Employee Benefit Trusts 0.8 0.1 Sale of non-liquid current asset investment – 0.2

Net cash inflow/(outflow) from capital expenditure and financial investment 27.3 (18.8)

Acquisitions and disposalsDisposal of fixed asset investments – Joint Ventures 24.7 (3.3)Investment in Metronet (10.4) –Loans to Joint Ventures (net) (0.7) –Subsidiary undertaking acquired – Hanscomb

– cash consideration including expenses – (6.6)– cash acquired – 1.6

Disposal of subsidiary undertaking – Atkins Americas Holdings Inc– cash received 11.3 – – cash disposed of (3.3) –

Disposal of Lambert Smith Hampton Belfast office 1.6 – Prior years’ acquisitions – (1.1)

Net cash inflow/(outflow) from acquisitions and disposals 23.2 (9.4)

Equity dividends paid (4.8) (6.6)

Cash inflow/(outflow) before use of liquid resources and financing 135.4 (5.7)

Management of liquid resources(Increase)/decrease in current asset investments (23.1) 1.7

FinancingCash (outflow)/inflow from short-term loans (47.9) 33.0 Redemption of loan stock (0.2) (0.8)Cash (outflow)/inflow from long-term loans (13.5) 4.6 Capital element of finance lease rental payments (3.0) (2.7)Shares issued – 0.2

Net cash (outflow)/inflow from financing (64.6) 34.3

Increase in cash 47.7 30.3

The Notes on pages 48 to 82 form part of these financial statements.

Consolidated cash flow statementfor the year ended 31 March 2004

46 WS Atkins plc Annual Report 2004

Restated(1)

2004 2003Notes £m £m

Profit/(loss) for the financial yearOperations 22.9 (42.9)Joint Ventures 4 14.5 4.9

37.4 (38.0)

Differences on exchange 24 (4.4) (1.9)

Total gains and losses recognised in the year 33.0 (39.9)

Prior year adjustment 12 5.8

Total gains and losses recognised since the last annual report 38.8

Historical cost profits and losses do not differ materially from those disclosed in the consolidated profit and loss account.

Reconciliation of movements in Groupshareholders’ fundsfor the year ended 31 March 2004

Restated(1)

2004 2003Notes £m £m

Opening shareholders’ funds as reported 69.7 115.4Prior year adjustment 12 (14.7) (29.0)

Opening shareholders’ funds – restated 55.0 86.4

Profit/(loss) for the financial period 37.4 (38.0)Operations 22.9 (42.9)Joint Ventures 4 14.5 4.9

Dividends 9 (8.8) (2.8)Differences on exchange 24 (4.4) (1.9)Share-based movements 0.7 (2.6)Issue of new shares 24 6.9 13.3Employee Benefit Trusts 1.9 0.6

Closing shareholders’ funds 88.7 55.0

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

The Notes on pages 48 to 82 form part of these financial statements.

Consolidated statement of total recognised gains and lossesfor the year ended 31 March 2004

47WS Atkins plc Annual Report 2004

2004 2003Notes £m £m

Fixed assetsInvestments 15 94.0 58.5

Current assetsDebtors 17 21.6 24.8

Current liabilitiesCreditors: amounts falling due within one year 19 (22.7) (13.2)

Net current (liabilities)/assets (1.1) 11.6

Total assets less current liabilities 92.9 70.1

Capital and reservesCalled up share capital 23 0.5 0.5Share premium account 24 62.3 55.4Capital redemption reserve 24 0.2 0.2Merger reserve 24 8.7 8.7Profit and loss account 24 21.2 5.3

Shareholders’ funds – equity interests 92.9 70.1

Keith Clarke Stephen BillinghamDirector Director

Approved by the Board on 19 July 2004.

The Notes on pages 48 to 82 form part of these financial statements.

Parent company balance sheetas at 31 March 2004

48 WS Atkins plc Annual Report 2004

Accounting policiesThe Group financial statements are prepared in accordance with applicable United Kingdom Accounting Standards. A summaryof the more important Group accounting policies is given below. Accounting policies have been applied consistently withprevious years except as noted below.

During the year the Group has implemented Urgent Issues Task Force (UITF) 38 (Accounting for ESOP trusts) and UITF 17, asamended (Employee Share Schemes). Investments in own shares which were previously disclosed in fixed assets investmentsare now shown as a reduction to shareholders’ funds. Under UITF 38, the exceptional impairment made against the carryingvalue of own shares in the year ended 31 March 2003 has been reversed.

UITF 17, as amended, requires the difference between the market value of the shares at the date of award and anyconsideration paid for the shares to be charged to the profit and loss account over the performance period of each scheme.The charge to the profit and loss account was previously based on the difference between the original cost of the shares andany consideration paid for the shares.

The SAYE schemes’ options are now included in the option charge. The Group had previously treated the SAYE schemes as exempt as allowed under UITF 17, as amended.

The 2003 accounts have been restated to reflect the adoption of UITF 38 and UITF 17, as amended. The impact of thesechanges on the profit and loss account and reserves is described in Note 12.

The Directors have reviewed the appropriateness of the Group’s accounting policies in accordance with Financial ReportingStandard (FRS) 18 and considered the impact of the introduction of FRS 5 application Note G. The contract accounting policyhas been refined to accommodate the complexity and length of the contracts being entered into.

Under the transitional rules of FRS 17, the Group has made certain disclosures in relation to the balance sheet andperformance statements which are presented in Note 29.

Basis of accountingThe Financial Statements have been prepared under the historical cost convention, as modified by the valuation of currentasset investments as set out below.

Basis of consolidationThe consolidated profit and loss account and balance sheet include the accounts of the Company and its subsidiaryundertakings. The results of the subsidiary undertakings acquired during the year are included in the profit and loss accountfrom the date of acquisition.

The accounts of the Employee Benefit Trusts (EBTs) are incorporated into the results of the Group as, although they areadministered by independent Trustees and their assets are held separately from the Group, in practice the Group’s advice on how the assets are used for the benefit of employees is normally accepted. The Group bears the major risks and rewards of the assets held by the EBTs until the shares vest unconditionally in the employees.

In accordance with UITF 38 shares in WS Atkins plc held by the EBTs are shown as a reduction in shareholders’ funds. Otherassets and liabilities held by the EBTs are consolidated with the assets of the Group.

As permitted by Section 230 of the Companies Act 1985, no profit and loss account is presented for the parent company.

GoodwillGoodwill is stated at cost less a provision for amortisation. Amortisation is calculated to write off the cost in equal annualinstalments over its expected useful life. The useful life is not normally expected to exceed 20 years. Provision is made forimpairment.

Joint VenturesIn accordance with FRS 9 Associates and Joint Ventures, the Group accounts for Joint Ventures under the gross equity methodof accounting. The results of holdings in Joint Ventures are included from the date on which the Group acquires joint control.

Where there is sufficient evidence that an event has irrevocably changed the relationship between the Group and the JointVenture such that the Group’s ability to exercise significant influence is removed, the carrying amount at the date of the eventis reported as an investment and no account is taken of subsequent changes in the venture’s assets and liabilities.

The results, assets and liabilities of Joint Ventures are stated in accordance with Group accounting policies. Where JointVentures do not adopt Group accounting policies, their reported results are restated to comply with Group accounting policies.Where Joint Ventures do not adopt accounting periods that are co-terminus with the Group’s results, results and net assets arebased upon accounts drawn up to the Group’s accounting reference date.

Notes to the financial statements

49WS Atkins plc Annual Report 2004

TurnoverGroup turnover from long-term contracts comprises the value of work performed during the year by reference to total salesvalue and stage of completion of these contracts.

Turnover from other contract activities represents fee income receivable in respect of services provided during the year.

Under certain services contracts, the Group manages customer expenditure and is obliged to purchase goods and services fromthird party contractors and recharge them on to the customer at cost. The amounts charged by contractors and recharged tocustomers are excluded from turnover and cost of sales. Debtors, creditors and cash relating to these transactions are includedin the Group balance sheet.

Contract accountingThe value of contract work in progress comprises the costs incurred on contracts plus an appropriate proportion of overheadsand attributable profit. Profit is recognised on a percentage completion basis when the outcome of a contract or project canbe reasonably forseen. Provision is made in full for estimated losses. Where the outcome of a contract cannot be reasonablyforeseen, profit is taken on completion. Where contracts span two accounting periods profit is not recognised until thecontract is 50% complete. Where contracts span more than two accounting periods profit is recognised in each period toreflect the obligations completed in the period, provided that the outcome of the contract can be reasonably foreseen.

Fees invoiced on account are deducted from the value of work in progress and the balance is separately disclosed in debtors as amounts recoverable on contracts, unless such fees exceed the value of the work in progress on any contract when theexcess is separately disclosed in current liabilities as fees invoiced in advance.

Income recognition on outsourcing contracts is determined based on the proportion of the annual service delivered to date.Where the costs of obligations in relation to the non-renewal or termination of a contract are higher in the final year of thecontract a proportion of revenue is deferred each year to meet these anticipated costs.

Full provision is made for losses on outsourcing contracts if the forecast costs of fulfilling the contract throughout the contractperiod exceed the forecast income receivable. In assessing the amount of the loss to provide on an outsourcing contract,account is taken of the Group’s share of the forecast results from Joint Ventures which the contract is servicing.

Stocks are stated at the lower of cost and net realisable value.

Pre-contract costs relating to PFI/PPP investments which involve Special Purpose CompaniesThe Group accounts for all pre-contract costs in accordance with UITF 34 (Pre-contract costs). Costs incurred before it isvirtually certain 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 profit and loss account over the same period as the Group’s interest in any Special Purpose Company (SPC) charges the equivalent capitalised amounts to the profit and loss account.

Bid recovery fees are deferred and credited to the profit and loss account over the same period as the Group’s interest in anySPC charges the equivalent capitalised amounts to the profit and loss account.

Where the Group’s interest in an SPC reduces, the deferred bid recovery fees are credited to the profit and loss account in proportion to the reduction of the Group’s interest.

Depreciation and amortisationTangible and intangible fixed assets are depreciated on a straight line basis calculated at annual rates to write off each assetover the term of its useful life as follows:

Goodwill 10 to 20 yearsFreehold buildings 10 to 50 yearsShort leasehold over the life of the leasePlant and machinery 3 to 10 yearsSpecial purpose industrial motor vehicles 3 to 12 yearsOther motor vehicles 3 to 4 yearsInformation Technology 3 to 5 yearsCorporate Information Systems 7 years

No depreciation is provided in respect of freehold land.

The Directors annually review the estimated useful lives of the fixed assets.

Costs included in Corporate Information Systems are those directly attributable to design, construction and testing of newsystems (including major enhancements) from the point of inception to the point of satisfactory completion. Costs includecosts of own labour. Maintenance and minor modifications are expensed to profit and loss as incurred.

50 WS Atkins plc Annual Report 2004

Share Scheme Reserve and costs of optionsThe Share Scheme Reserve represents the investment in own shares which are held by the EBTs primarily to satisfy the Group’sliabilities to employees for share options and other long-term incentive plans.

In accordance with UITF 17, as amended, the difference between the market value of the shares at the date of the award andany consideration paid for the shares is charged to the profit and loss account over the performance period of each scheme.Any cumulative charge relating to options which have lapsed in the year is reversed in the year of lapse. The charge is appliedto all share option schemes including SAYE schemes.

Current asset investmentsCurrent asset investments include UK Government securities, short-term deposits and restricted cash deposits, which are shownat market value. Restricted cash deposits relate to accounts where withdrawals are restricted under contractual agreements.

Lease obligationsOn the inception of finance leases, the asset is capitalised and a liability recognised for the present value of the minimum leasepayments. Assets are depreciated over the remaining contract term. Rentals are apportioned between capital and interestexpense to achieve a constant rate of charge on the outstanding obligation. The costs of operating leases are charged to profitand loss account as incurred.

Where the Group acts as a lessor in an arrangement which transfers substantially all the risks and rewards of ownership to athird party, that lease is treated as a finance lease. All other lease arrangements are treated as operating leases. Debtors underfinance leases represent outstanding amounts due under these agreements less finance charges allocated to future periods.Finance lease interest is recognised over the primary period of the lease so as to produce a constant rate of return on the netcash investment. Rental income from operating leases is accounted for on a straight line basis over the period of the lease.

Pension schemesContributions to funded defined benefit pension schemes are calculated as a percentage, agreed on independent actuarialadvice, of the pensionable salaries of employees. The cost of providing pensions and any variations from the regular cost,arising from actuarial valuations, is charged or credited to the profit and loss account on a systematic basis over the expectedaverage remaining service lives of the members of each scheme. The pension cost is assessed in accordance with the advice ofqualified actuaries.

The difference between the charge for pensions and the total contributions actually paid is included within provisions forliabilities and charges.

The pension costs relating to the defined contribution schemes represent contributions payable by the Group.

Deferred taxationDeferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet datewhere the transactions or events that give rise to an obligation to pay more or less tax in the future have occurred by the balancesheet date. A net deferred tax asset is recognised only when it can be regarded as more likely than not that it will be recovered.Deferred tax is measured on a non-discounted basis using tax rates that have been enacted by the balance sheet date.

Foreign currency transactions and financial instrumentsForward foreign exchange contracts entered into as hedges of future purchases and sales denominated in foreign currency arerecorded at cost and are then revalued to market rates at each balance sheet date. Gains and losses are deferred and taken toprofit and loss to match the maturity of the underlying transactions. Gains and losses on those contracts which are no longerdesignated as hedges are taken to the profit and loss account as they arise.

Foreign currency debtors covered by forward currency contracts are translated at the contract rates of exchange; other foreigncurrency denominated assets and liabilities are translated at closing rates of exchange. Gains and losses are taken to the profitand loss account, except that exchange differences on foreign currency borrowings to finance foreign currency net investmentsare taken to reserves.

Trading results of overseas subsidiaries are translated at average rates of exchange. Differences resulting from the retranslationof opening net assets and results for the year at closing rates are taken to the statement of total recognised gains and losses.

US Dollar borrowings are used to hedge against the Group investment in the USA. The net exchange differences are taken toreserves. Forward foreign exchange contracts are carried on the balance sheet at fair value (‘marked to market’) with changesin the value recognised in the profit and loss account for the period.

WarrantsWarrants are held within shareholders’ funds at the fair value of the consideration received at the date of issue. The fair value is deemed to be the difference between the exercise price of the warrants and the prevailing market value of the shares at thedate of issuing the warrants. Where warrants are issued as consideration for the cost of a debt instrument the fair value of thewarrant is charged to the profit and loss account on a weighted average basis over the life of the debt instrument. Warrantsthat lapse unexercised are credited back to the profit and loss account reserve.

Notes to the financial statementscontinued

51WS Atkins plc Annual Report 2004

1. Segmental analysisRestated(1) Restated(1)

Profit/(loss) Profit/(loss) Net assets/ Net assets/Turnover Turnover before taxation before taxation (liabilities) (liabilities)

2004 2003 2004 2003 2004 2003£m £m £m £m £m £m

A. Geographic area by location of operationsUnited Kingdom 825.6 718.8 33.5 (1.9) 36.9 (31.1)– Continuing operations 825.6 718.8 43.7 0.1 34.0 (39.3)– Goodwill – – (5.4) (5.5) 18.9 25.0 – Amortisation of pension (deficit)/surplus – – (3.4) 3.7 – – – Employee Benefit Trusts – – (1.4) (0.2) (16.0) (16.8)

Overseas 124.8 114.9 2.1 4.5 25.9 54.9 Other European Countries– Continuing operations 44.2 46.5 2.2 1.6 (2.5) 12.7 – Goodwill – – (0.6) (1.0) 4.4 5.9 Middle East 17.8 16.4 1.9 1.4 0.7 6.3Asia/Pacific 34.1 30.8 0.8 0.2 3.6 7.7 North America – Continuing operations 28.7 21.2 (0.4) 3.7 6.2 3.7 – Goodwill – – (1.8) (1.4) 13.5 18.6

United Kingdom– Discontinued operations 9.6 23.9 0.2 (2.6) – 0.2North America– Discontinued operations 31.8 77.7 (1.3) 1.3 – 11.5– Goodwill – – – (3.2) – –

Total before joint ventures and exceptional items 991.8 935.3 34.5 (1.9) 62.8 35.5

Joint Ventures 250.0 76.9 32.8 14.2 25.9 19.5 United Kingdom – continuing operations 164.4 9.4 20.2 2.1 24.3 5.0 United Kingdom – discontinued operations 29.7 15.2 8.0 8.5 – 10.1 Overseas – continuing operations 24.9 7.8 2.6 1.0 1.6 1.6 Overseas – discontinued operations 31.0 44.5 2.0 2.6 – 2.8

Exceptional items – continuing operations – – – (24.7) – – Exceptional items – discontinued operations – – – (23.4) – –

1,241.8 1,012.2 67.3 (35.8) 88.7 55.0

Profit on sale of subsidiary undertaking and Joint Ventures – – 13.5 – – –

Interest receivable and similar income – – 15.7 6.3 – – Interest payable and similar charges – – (34.5) (15.8) – –

1,241.8 1,012.2 62.0 (45.3) 88.7 55.0

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

There was no material difference between geographic turnover by location of operation and by location of customer.

Turnover excludes recharges of £125.0m (2003: £186.2m) where under certain services contracts the Group manages customerexpenditure and is obliged to purchase goods and services from third party sub-contractors and recharge them to the customerat cost.

52 WS Atkins plc Annual Report 2004

1. Segmental analysis (continued)Restated(1) Restated(1)

Profit/(loss) Profit/(loss) Net assets/ Net assets/Turnover Turnover before taxation before taxation (liabilities) (liabilities)

2004 2003 2004 2003 2004 2003£m £m £m £m £m £m

B. By class of businessBefore goodwillTransport 410.3 337.3 23.5 10.1 (18.6) 0.3 Design and Engineering Solutions 264.3 241.7 13.4 3.2 11.7 30.9 Management and Project Services 209.0 188.1 3.6 2.1 4.8 7.7 Equity Investments 66.8 66.6 5.9 4.7 (22.8) (1.9)

950.4 833.7 46.4 20.1 (24.9) 37.0

Discontinued operations 41.4 101.6 (1.1) (1.3) – 11.7

Trading result 991.8 935.3 45.3 18.8 (24.9) 48.7

Goodwill – – (7.8) (11.1) 36.8 49.4 Transport – – (0.8) (0.7) 5.1 5.9 Design and Engineering Solutions – – (0.1) (0.3) 1.0 1.1 Management and Project Services – – (2.2) (2.2) 15.8 21.4 Equity Investments – – (4.7) (4.7) 14.9 21.0

Goodwill – continuing operations – – (7.8) (7.9) 36.8 49.4 Goodwill – discontinued operations – – – (3.2) – –

After goodwill 950.4 833.7 38.6 12.2 11.9 86.4 Transport 410.3 337.3 22.7 9.4 (13.5) 6.2 Design and Engineering Solutions 264.3 241.7 13.3 2.9 12.7 32.0 Management and Project Services 209.0 188.1 1.4 (0.1) 20.6 29.1 Equity Investments 66.8 66.6 1.2 – (7.9) 19.1

Discontinued operations 41.4 101.6 (1.1) (4.5) – 11.7

991.8 935.3 37.5 7.7 11.9 98.1

PFI/PPP bid costs – – (3.0) (13.1) – – Colchester Garrison dilution gain – – 4.8 – – – Amortisation of pension (deficit)/surplus – – (3.4) 3.7 – – Employee Benefit Trusts – – (1.4) (0.2) (16.0) (16.8)Corporate net assets/(liabilities) – – – – 66.9 (45.8)

Total before Joint Ventures and exceptional items 991.8 935.3 34.5 (1.9) 62.8 35.5

Joint Ventures 250.0 76.9 32.8 14.2 25.9 19.5 Transport 19.3 – 0.8 – 0.8 – Design and Engineering Solutions 0.1 0.1 (0.2) (0.1) (0.2) (0.1)Management and Project Services 17.1 – 1.0 – 0.4 – Equity Investments 152.8 17.1 21.2 3.2 24.9 6.7 Discontinued Operations 60.7 59.7 10.0 11.1 – 12.9

Exceptional items – continuing operations – – – (24.7) – – Exceptional items – discontinued operations – – – (23.4) – –

1,241.8 1,012.2 67.3 (35.8) 88.7 55.0 Profit on sale of subsidiary undertaking

and Joint Ventures – – 13.5 – – – Interest receivable and similar income – – 15.7 6.3 – – Interest payable and similar charges – – (34.5) (15.8) – –

1,241.8 1,012.2 62.0 (45.3) 88.7 55.0

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

Notes to the financial statementscontinued

53WS Atkins plc Annual Report 2004

1. Segmental analysis (continued)Restated(1)

Net assets/ Net assets/(liabilities) (liabilities)

2004 2003£m £m

Corporate net assets/(liabilities) comprise:Fixed assets 54.3 59.7 Net cash balances 83.6 (45.8)Trade creditors (33.1) (47.5)Deferred tax 12.8 17.3 Corporation tax (13.9) (2.0)Proposed dividends (6.8) (2.8)Provision for liabilities and charges (34.1) (22.7)Other 4.1 (2.0)

66.9 (45.8)

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

As stated in the Interim results, the continuing businesses have been consolidated into the following segments: Transport;Design and Engineering Solutions; and Management and Project Services, supported by Equity Investments. The table belowprovides information for the segments as historically defined.

Restated(1) Restated(1)

Profit before Profit before Net assets/ Net assets/Turnover Turnover taxation taxation (liabilities) (liabilities)

2004 2003 2004 2003 2004 2003£m £m £m £m £m £m

By class of business (prior year basis)Before goodwillTransport 387.4 312.0 22.3 9.2 (15.7) (3.9)Design and Government Services 195.2 172.0 11.8 1.1 (28.4) 31.5 Industry 120.9 116.4 4.2 (0.3) 7.6 10.3 Commercial Services 112.5 118.4 4.7 4.5 1.6 2.7 International 134.4 114.9 3.4 5.6 10.0 (3.6)

950.4 833.7 46.4 20.1 (24.9) 37.0

GoodwillTransport – – – – Design and Government Services – – – – Industry (0.1) (0.3) 1.0 1.1 Commercial Services (5.1) (5.2) 17.1 23.9 International (2.6) (2.4) 18.7 24.4

(7.8) (7.9) 36.8 49.4

After goodwill Transport 387.4 312.0 22.3 9.2 (15.7) (3.9)Design and Government Services 195.2 172.0 11.8 1.1 (28.4) 31.5 Industry 120.9 116.4 4.1 (0.6) 8.6 11.4 Commercial Services 112.5 118.4 (0.4) (0.7) 18.7 26.6 International 134.4 114.9 0.8 3.2 28.7 20.8

950.4 833.7 38.6 12.2 11.9 86.4

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

54 WS Atkins plc Annual Report 2004

1. Segmental analysis (continued)Operating Operating

margins margins2004 2003

% %

C. Trading operating marginsBy class of businessTransport 5.7 3.0 Design and Engineering Solutions 5.1 1.3 Management and Project Services 1.7 1.1 Equity Investments 8.8 7.1

Continuing operations 4.9 2.4

Discontinued operations (2.7) (1.3)

4.6 2.0

By class of business (prior year basis)Transport 5.8 2.9 Design and Government Services 6.0 0.6 Industry 3.5 (0.3)Commercial Services 4.2 3.8 International 2.5 4.9

4.9 2.4

Discontinued operations (2.7) (1.3)

4.6 2.0

Trading operating margins exclude amortisation of goodwill and pension fund (deficit)/surplus, PFI/PPP bid costs, exceptionalitems, Colchester Garrison dilution gain, Employee Benefit Trusts and share of Joint Ventures.

2. Operating profitRestated(1)

2004 2003Continuing Discontinued Total Continuing Discontinued Total

£m £m £m £m £m £m

Turnover 950.4 41.4 991.8 833.7 101.6 935.3 Cost of sales (587.8) (31.4) (619.2) (502.9) (73.2) (576.1)

Gross profit 362.6 10.0 372.6 330.8 28.4 359.2

Administrative costs (327.0) (11.1) (338.1) (356.1) (53.1) (409.2)Selling costs (29.9) (0.7) (30.6) (29.4) (4.7) (34.1)Administrative expenses excluding selling costs (297.1) (10.4) (307.5) (302.0) (25.0) (327.0)Exceptional administrative expenses – – – (24.7) (23.4) (48.1)

Operating profit/(loss) excluding share of Joint Ventures 35.6 (1.1) 34.5 (25.3) (24.7) (50.0)

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

Notes to the financial statementscontinued

55WS Atkins plc Annual Report 2004

2. Operating profit (continued)Restated(1)

2004 2003Total Total

£m £m

Operating profit/(loss) is arrived at after charging/(crediting):

Depreciation and impairment of tangible fixed assets:owned – exceptional write downs – 1.8 owned 15.1 20.6 leased 3.9 1.6

(Profit)/loss on sale of tangible fixed assets (0.1) 0.4 Profit on disposal of current asset non-liquid investments – (0.1)Amortisation and impairment of intangible fixed assets:

amortisation of goodwill 7.8 11.1impairment of goodwill – 30.7

Payments under operating leases:land and buildings 22.2 18.7plant, machinery and vehicles 6.0 7.4

Amounts payable to auditors: PricewaterhouseCoopers LLPaudit services(2) – for current year 0.8 1.0non-audit services – taxation services (compliance) 0.1 0.1

– taxation services (advisory) 0.1 0.6– strategy and other services – 1.3

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.(2) Includes £50,000 audit fee for the holding company (2003: £50,000).

3. Exceptional itemsRestated(1)

2004 2003£m £m

Operating itemsRedundancy and other restructuring costs – (14.8)Impairment of goodwill, fixed and current assets – (33.3)

– (48.1)Non-operating itemsNet profit on disposal of subsidiary undertaking 0.9 – Net profit on disposal of Joint Ventures 12.6 –

13.5 (48.1)

(1) The amount written off investments in 2003 has been reversed following the implementation of UITF 38 and UITF 17, as amended, see Note 12.

Disposal of subsidiary undertakingsOn 9 September 2003, the Group sold its 100% interest in the ordinary share capital of Atkins Americas Holdings Inc (formerlyAtkins Benham Inc). The operating loss (before amortisation of goodwill and exceptional items) of Atkins Americas Holdings Incup to the date of disposal was £1.2m. Operating profit (before amortisation of goodwill and exceptional items) for the lastfinancial year was £1.3m.

Net assets disposed of, and the related sale proceeds, were as follows:£m

Net assets 10.4Profit on disposal 0.9

Disposal proceeds – satisfied in cash 11.3

Included in net assets sold was cash of £3.3m.

56 WS Atkins plc Annual Report 2004

3. Exceptional items (continued)Disposal of Joint VenturesDuring the year the Group also sold its interests in a number of Joint Ventures. The share of net assets disposed of, and therelated sale proceeds, were as follows:

£m

Net assets 17.0Deferred income release (3.8)Profit on disposal 12.6

Disposal proceeds 25.8

The disposal proceeds consisted of £24.7m cash and £1.1m deferred consideration, payable over five years.

The Group sold its interest in the following Joint Ventures:

December 2003 Atkins Rebserve (Proprietary) Ltd (AtReb). AtReb has an interest in TFMC (Proprietary) Ltd, which was the company established to undertake the Telkom South Africa facilities management contract.

January 2004 Connect Roads Limited and Connect M77/GS0 Holdings Limited.

March 2004 NewSchools Limited, NewSchools (Cornwall) Holdings Limited, NewSchools (Leyton) Holdings Limited, NewSchools (Swanscombe) Holdings Limited and NewSchools (Merton) Holdings Limited.

The profit before tax for the Group’s interest in the above Joint Venture disposals up to the date of disposal was £6.1m (full year 2003: £5.9m).

The exceptional charge of £48.1m in 2003 included a provision for vacant property resulting from the restructuring programmeof that year. Following an impairment review of goodwill and other assets, an impairment charge of £30.7m was made togoodwill, a £1.8m charge to tangible fixed assets and a £0.8m charge to net current assets.

4. Joint Ventures4.a) Share of income from interests in Joint Ventures

Others Others 2004 Others Others 2003Metronet continuing discontinued Total continuing discontinued Total

£m £m £m £m £m £m £m

Turnover 123.2 66.1 60.7 250.0 17.2 59.7 76.9 Operating expenditure (105.8) (60.7) (50.7) (217.2) (14.1) (48.6) (62.7)

Operating profit 17.4 5.4 10.0 32.8 3.1 11.1 14.2

Interest receivable 8.1 2.6 1.6 12.3 1.7 0.8 2.5 Interest payable (14.7) (4.3) (5.5) (24.5) (4.0) (6.0) (10.0)

Profit before taxation 10.8 3.7 6.1 20.6 0.8 5.9 6.7 Taxation (3.6) (0.5) (2.0) (6.1) 0.1 (1.9) (1.8)

Profit after taxation 7.2 3.2 4.1 14.5 0.9 4.0 4.9

Notes to the financial statementscontinued

57WS Atkins plc Annual Report 2004

4. Joint Ventures (continued)4.b) Share of net assets of Joint Ventures

2004 2003Metronet Others Total Total

£m £m £m £m

Gross assets – continuing 333.0 141.0 474.0 56.8Goodwill 8.3 – 8.3 0.5Fixed assets 94.0 12.6 106.6 30.9Cash at bank and in hand 70.3 11.8 82.1 1.3Other current assets 160.4 116.6 277.0 24.1

Gross liabilities – continuing (315.4) (132.7) (448.1) (50.2)Liabilities due within one year (66.0) (14.8) (80.8) (6.1)Long term debt (228.9) (113.2) (342.1) (40.3)Other long term liabilities (20.5) (4.7) (25.2) (3.8)

Total net assets continuing 17.6 8.3 25.9 6.6Gross assets – discontinued – – – 119.3Gross liabilities – discontinued – – – (106.4)

Total share of net assets 17.6 8.3 25.9 19.5

4.c) Joint Venture transactions with the Group2004 2003

Metronet Others Total Total£m £m £m £m

Turnover 2.9 45.6 48.5 7.5 Included in liabilities due within one year:

– Trading balances 0.6 5.1 5.7 0.2 Included in liabilities due after more than one year:

– Subordinated debt with WS Atkins – 4.1 4.1 10.1

4.d) Loan Balances held by Joint VenturesLoan at Term

31 March 2004 remaining£m

Metronet – Bank facility 184.5 8-27 yrsMetronet – Bonds 960.2 29 yrs South Manchester Healthcare (Holdings) Limited 76.8 19 yrs Mercia Healthcare (Holdings) Limited 59.5 20 yrs RMPA Holdings Limited 580.0 34 yrsTotal Solutions for Industry Limited 4.5 12 yrsNew Schools (Penweddig) Holdings Limited 9.6 26 yrs

Loan balances held by the Joint Ventures have not been guaranteed by the Group.

4.e) Group Share of Capital Commitments2004 2003

Metronet Others Total Total£m £m £m £m

Capital commitments 372.3 4.5 376.8 3.8

Capital commitments for Metronet represent the long-term contractual commitment under the 30-year Public PrivatePartnership (PPP) contract signed with London Underground Limited on 4 April 2003. The 30-year contract is broken down into four 71/2 year periods.

58 WS Atkins plc Annual Report 2004

4. Joint Ventures (continued)4.f) Metronet

Financial CloseOn 4 April 2003, Financial Close was reached on the 30-year Metronet London Underground PPP in which the Group is a 20%equal partner.

At Financial Close, Atkins received £20.1m in respect of bid cost recoveries and project development fees from Metronet. Inline with the Group’s accounting policy in relation to pre-contract costs incurred on PFI/PPP investments, this sum was recognisedon the balance sheet and will be released to the profit and loss account over 30 years.

Atkins will invest £70m in Metronet by way of equity and shareholder subordinated debt over the first six years of theconcession. During the year ended 31 March 2004, the Group invested £10.4m. Atkins has obtained standby Letters of Creditfrom its bankers to support the deferred element of its commitment. The fees for the standby Letters of Credit included anagreement to issue warrants in respect of 4,715,200 shares (which represented 4.73% of Atkins’ issued share capital at thetime), all of which were exercised during the year to 31 March 2004. The cost of these warrants was £6.9m, representing thedifference between the market price of the shares at Financial Close, 145p per share, and the amount payable on exercise ofthe warrants, being the nominal value of the shares issued of 0.5p per share. This amount will be charged to the profit andloss account on a weighted average basis over the life of the standby Letters of Credit.

The contractThe Metronet PPP companies have two separate 30-year performance-based contracts which together cover over two thirds of the London Underground network. The contracts, which are split into four 71/2 year periods, cover inter alia the repairs,refurbishment and modernisation of the infrastructure. The contracts are subject to Periodic Review at the end of each 71/2 year period. The Periodic Reviews allow for restating the scope of work, the level of payment, the contractual terms andthe performance requirements.

The Metronet PPP companies have contracted with Trans4m Ltd, a Joint Venture company in which Atkins has a 25%shareholding, to undertake the civil engineering work and the refurbishment programme. Trans4m Ltd has signed a 71/2 yearcontract with Atkins for premises and civil design, inspection and assessment work and the design and build of newcommunication systems.

The Metronet PPP companies’ revenues consist of a fixed element (Underlying Infrastructure Service Charge) which is adjustedfor performance. Performance is measured under three categories: capability, availability and ambience. Shareholder returns are sensitive to these performance-based measures.

Consolidation of Metronet’s resultsIn line with the Group’s accounting policies on Joint Ventures, the results of Metronet have been accounted for under the gross equity method of accounting.

As part of its consolidation of the Metronet PPP companies’ balance sheets, Atkins has recognised £8.7m of goodwillassociated with liabilities inherited when the PPP companies were acquired from London Underground Limited. This will beamortised over 20 years.

Metronet’s accounting policiesThe Directors have reviewed Metronet’s accounting policies for their compatibility with that of the Group and, more specifically,Metronet’s policies on revenue recognition and interest capitalisation. In line with FRS 5 Application Note G, Metronetrecognises revenue on the fulfillment of its contractual obligations. Metronet also capitalises interest costs associated withcertain aspects of its capital projects programme.

The Directors consider that Metronet’s accounting policy on revenue recognition is compatible with the Group’s policy and that interest capitalisation for Metronet is appropriate. Consequently no adjustments have been made on consolidation.

Notes to the financial statementscontinued

59WS Atkins plc Annual Report 2004

5. Interest receivable and similar income2004 2003

£m £m

Interest receivable – short-term 2.5 1.7Income from fixed asset investment – 0.1Income from current asset liquid investments 0.5 0.6Income from finance leases 0.3 0.7Profit on sale of fixed asset investment – 0.6Employee Benefit Trusts 0.1 0.1

3.4 3.8Joint Ventures 12.3 2.5

15.7 6.3

6. Interest payable and similar charges2004 2003

£m £m

Interest payable on loans and other borrowings wholly repayable within five years:Bank loans and overdrafts (secured) 3.7 4.9 Hire purchase and finance leases 0.7 0.5 Letters of credit charges 4.2 – Other 1.4 0.4

10.0 5.8 Joint Ventures 24.5 10.0

34.5 15.8

7. Staff numbers and costs2004 2003

No. No.

Number of persons (including Executive Directors) employed by the Group as at 31 March 2004:By class of business:Transport 4,706 4,539Design and Engineering Solutions 4,339 4,597Management and Project Services 3,597 4,245Equity Investments 946 1,200Discontinued – 690Corporate 103 121

13,691 15,392

Those persons were based as follows:UK 11,325 12,082Non – UK 2,366 3,310

13,691 15,392

60 WS Atkins plc Annual Report 2004

7. Staff numbers and costs (continued)2004 2003

No. No.

Average number of persons (including Executive Directors) employed by the Group during the year:By class of business:Transport 4,587 4,639Design and Engineering Solutions 4,434 4,230Management and Project Services 3,812 4,478Equity Investments 1,008 1,197Discontinued 230 719Corporate 105 187

14,176 15,450

Those persons were based as follows:UK 11,494 12,418Non – UK 2,682 3,032

14,176 15,450

Aggregate payroll costs of those persons amounted to:£m £m

Salaries 389.6 413.4Profit share and performance-related bonus 15.9 12.1Social security costs 36.8 32.9Pension costs 29.3 18.0

471.6 476.4

2004 costs include £0.8m redundancy costs (2003: £5.6m).

Details of Directors’ remuneration (including pensions) and interests are detailed in the Remuneration Report.

8. Taxation8.a) Tax on profit/(loss) on ordinary activities

Restated(1)

2004 2003£m £m

UK corporation tax at 30% (2003: 30%) 12.5 1.9Relief for overseas taxation (0.1) (0.4)

Net UK current tax charge 12.4 1.5Overseas tax 0.5 1.9

Group current tax charge 12.9 3.4Joint Ventures 6.1 1.8

Total current tax 19.0 5.2

Deferred tax:Current year losses – (7.3)Other timing differences 4.5 (0.7)

4.5 (8.0)

Tax on profit/(loss) on ordinary activities before exceptional items 23.5 (2.8)Exceptional items 1.1 (4.5)

Tax on profit/(loss) on ordinary activities 24.6 (7.3)

(1) 2003 figures have been restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended (Employee Share Schemes), see Note 12.

Notes to the financial statementscontinued

61WS Atkins plc Annual Report 2004

8.b) Factors affecting current tax charge

The following table provides a reconciliation of the statutory corporation tax rate to the current tax rate of the Group on profitbefore taxation.

Restated(1)

2004 2003£m £m

Analysis of profit/(loss) before taxation:Operations 27.9 (3.9)Joint Ventures 20.6 6.7Exceptionals 13.5 (48.1)

62.0 (45.3)

Taxation:Operations 17.4 (4.6)Joint Ventures 6.1 1.8Exceptionals 1.1 (4.5)

24.6 (7.3)

Tax rate 39.7% 16.1%

% of profit before tax

UK statutory corporation tax rate 30.0 30.0

Increase/(decrease) resulting from:

Goodwill amortisation and impairment 3.8 (6.2)Expenses not deductible for tax purposes 2.9 (1.3)Adjustment in respect of overseas tax rates (0.2) (1.1)Exceptional items (4.8) (22.1)Adjustments in respect of EBTs 8.5 16.7Other (0.5) 0.1

Tax rate 39.7 16.1Impact of deferred tax (7.3) (17.6)

Current tax rate 32.4 (1.5)

(1) 2003 figures have been restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended (Employee Share Schemes), see Note 12.

8.c) Tax on Adjusted profit before tax2004 2003(1)

£m £m

Analysis of Adjusted profit before taxation:Operations 35.6 12.0Joint Ventures 20.6 6.7

56.2 18.7

Taxation on Adjusted profit before tax 17.7 3.5

Tax rate 31.5% 18.7%

62 WS Atkins plc Annual Report 2004

8.c) Tax on Adjusted profit before tax (continued)Analysis of tax charge on Adjusted profit before tax:

Restated(1)

2004 2003£m £m

Total tax charge/(credit) on profit/(loss) on ordinary activities 24.6 (7.3)

Explained by:Exceptionals (1.1) 4.5 Amortisation of pension deficit/(surplus) 1.0 (1.1)Metronet bid costs – 2.5Adjustments in respect of EBT’s (4.9) 4.9Colchester Garrison dilution gain (1.5) –Other (0.4) –

Tax charge on Adjusted profit before tax 17.7 3.5

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

9. Dividends2004 2003

£m £m

Interim paid – 2p per share (2003: nil) 2.0 – Final proposed – 7p per share payable 1 October 2004 (2003: 3p) 6.8 2.8

8.8 2.8

The Employee Benefit Trusts waived their entitlement to dividends which reduced the total dividend by £0.5m (2003: £0.2m).

10. Profits of the Holding CompanyThe holding company has not presented its own profit and loss account as permitted by Section 230 of the Companies Act 1985.The retained profit for the year was £15.9m (2003: £3.0m loss).

11. Earnings/(loss) per share Basic earnings per share are calculated in accordance with FRS 14 Earnings per share, by dividing profit after tax of £37.4m(2003 restated: loss of £38.0m) by the weighted average number of shares in issue during the period of 96,473,370(2003: 92,486,187), excluding 5,498,429 shares held by the Employee Benefit Trusts (EBTs) which have not unconditionallyvested in the employees.

Fully diluted earnings per share is the Basic earnings per share after allowing for the dilutive effect of the conversion intoordinary shares of the number of options outstanding during the period. The number of shares used for the Fully Dilutedcalculation is 97,668,548 (2003: 93,048,051). The options relate to the SAYE schemes, Equity Participation Plans and LongTerm Incentive Plans. In accordance with FRS 14, there is deemed to be no diluting effect of potential ordinary shares wherethere is a basic loss per share.

The adjusted earnings per share information has been calculated based on an Adjusted profit after tax of £38.5m(2003: £15.2m). Adjusted profit is before Metronet bid costs, amortisation of pension fund deficit/(surplus), amortisation of goodwill, exceptional items, Colchester Garrison dilution gain and Employee Benefit Trusts. The Board believes that thisadditional measure provides a better indicator of the underlying trends in the business.

Notes to the financial statementscontinued

63WS Atkins plc Annual Report 2004

11. Earnings/(loss) per share (continued)2004 2003

Average shares (‘000) 96,473 92,486 No. of shares used in fully diluted EPS (‘000) 97,669 93,048

Restated(1)

2004 2004 2003 2003£m p/share £m p/share

Profit/(loss) after taxation 37.4 (38.0)Fully diluted earnings per share 38.3 (41.1)Basic earnings per share 38.8 (41.1)Adjustments after accounting for tax:

Amortisation of goodwill 7.8 8.1 11.1 12.0 EBTs 1.8 1.8 0.1 0.2 Tax on intra-group loans to EBTs 4.9 5.1 (4.9) (5.3)Amortisation of pension fund deficit/(surplus) 2.4 2.5 (2.6) (2.8)Metronet bid costs – – 5.9 6.4 Colchester Garrison dilution gain (3.4) (3.5) – – Exceptional items (12.4) (12.9) 43.6 47.1

Adjusted profit after tax/Adjusted earnings per share 38.5 39.9 15.2 16.5 Fully diluted adjusted earnings per share 39.4 16.3

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

12. Changes to accounting policiesThe UITF abstracts 38 (Accounting for ESOP trusts) and 17, as amended, (Employee Share Schemes) have been adopted in the current year. The 2003 comparatives have been restated.

UITF 38 requires that investments in own shares which were previously disclosed in Fixed Asset Investments are shown as a reduction to shareholders’ funds.

UITF 17, as amended, requires the difference between market value of the shares at the date of award and any considerationpaid for the shares to be charged to the profit and loss account over the performance period of each scheme. The charge to the profit and loss account was previously based on the difference between the original cost of the shares and anyconsideration paid for the shares.

The Group now charges the cost of SAYE options to profit and loss. Previously the Group had taken advantage of theexemption allowed in UITF 17, as amended, and not applied the exemption to SAYE schemes.

Operating profit has been reduced by £1.3m (2003: increase in operating loss £0.1m) resulting from the changes in the basis of calculating the charges to profit and loss account and the timing of their recognition. The impairment provision madeagainst investment in own shares has been reversed as a consequence of the adoption of UITF 38 and is included in the£16.3m adjustment to the profit before tax in 2003.

Other investments and reserves have been reduced by £14.7m (2003: £29.0m) as a result of the changes and the need to deduct the cost of own shares held to satisfy employee share based benefits, from reserves.

A realised gain of £5.8m has been reported in the Statement of total recognised gains and losses. This is the net effect ofreversing the cumulative UITF 17 charge of £20.3m, which includes the impairment charge from the prior year, and includingthe revised UITF 17 (as amended by UITF 38) charge of £14.5m.

The following table details the impact of the changes on the 2003 results:2003 2003 2003

As previously stated Adjustment As restated

£m £m £m

Consolidated profit and loss accountAdministrative expenses (409.1) (0.1) (409.2)Operating loss (35.7) (0.1) (35.8)

Consolidated balance sheetInvestment in own shares 14.7 (14.7) – Shareholders’ funds 69.7 (14.7) 55.0

64 WS Atkins plc Annual Report 2004

13. Intangible fixed assets 2004 2003

£m £m

GoodwillCost at 1 April 114.5 96.4 Acquisition of Hanscomb Inc – 20.3 Disposal of Atkins Americas Holdings Inc (31.1) – Disposal of Lambert Smith Hampton Belfast office (2.3) – Difference on exchange (4.0) (2.2)

Cost at 31 March 77.1 114.5

Amortisation at 1 April 65.0 23.7 Difference on exchange (0.7) (0.5)Amortisation charge for the year 7.8 11.1 Disposal of Atkins Americas Holdings Inc (31.1) – Disposal of Lambert Smith Hampton Belfast Office (0.7) – Impairment provision – 30.7

Amortisation at 31 March 40.3 65.0

Net Book Value at 31 March 36.8 49.5

14. Tangible fixed assetsFreehold Short-term Plant,land and leasehold machineryproperty property & vehicles Total

£m £m £m £m

GroupCost at 1 April 2003 9.6 9.0 115.3 133.9 Additions – 0.4 11.8 12.2 Disposal of subsidiary undertaking – – (13.2) (13.2)Disposals – (1.7) (16.0) (17.7)Differences on exchange – (0.2) (0.6) (0.8)

Cost at 31 March 2004 9.6 7.5 97.3 114.4

Depreciation at 1 April 2003 6.0 2.0 60.5 68.5 Disposals – (1.6) (14.6) (16.2)Disposal of subsidiary undertaking – – (13.2) (13.2)Depreciation charge for the year 0.7 1.5 16.8 19.0 Differences on exchange – (0.1) (0.5) (0.6)

Depreciation at 31 March 2004 6.7 1.8 49.0 57.5

Net Book Value at 31 March 2004 2.9 5.7 48.3 56.9

Net Book Value at 31 March 2003 3.6 7.0 54.8 65.4

The market value of Freehold land and property is estimated at £10.5m.

Notes to the financial statementscontinued

65WS Atkins plc Annual Report 2004

14. Tangible fixed assets (continued)Included in the above are equipment and vehicles held under finance leases and hire purchase contracts as follows:

2004 2003£m £m

Cost 13.9 9.9Depreciation (5.1) (3.2)

Net Book Value 8.8 6.7

Additions to fixed assets funded by finance leases were £4.8m (2003: £3.5m).

Included in the above are equipment and vehicles leased to customers under operating leases as follows:

2004 2003£m £m

Cost 5.4 5.4Depreciation (3.1) (1.5)

Net Book Value 2.3 3.9

Rents receivable from operating leases of £0.5m (2003: £0.5m) are included in turnover.

15. Fixed assets – Unlisted investmentsJoint

Ventures and Subsidiaries Associates Total

£m £m £m

CompanyCost at 1 April 2003 72.2 8.4 80.6Additions 39.7 2.4 42.1Disposals – (6.7) (6.7)

Cost at 31 March 2004 111.9 4.1 116.0

Provisions at 1 April 2003 21.9 0.2 22.1Charge/(release) in year 0.1 (0.2) (0.1)

Provisions at 31 March 2004 22.0 – 22.0

Net Book Value at 31 March 2004 89.9 4.1 94.0

Net Book Value at 31 March 2003 50.3 8.2 58.5

As part of the reorganisation within the Group, WS Atkins plc invested a further £39.7m in its subsidiary Atkins Limited(formerly WS Atkins (Services) Limited).

16. StocksGroup

2004 2003£m £m

Stocks of raw materials and consumables 0.5 0.4

66 WS Atkins plc Annual Report 2004

17. DebtorsGroup Company

2004 2003 2004 2003£m £m £m £m

Amounts due within one year:Trade debtors 159.5 185.5 – – Amounts recoverable on contracts 71.1 13.4 – – Deferred tax (Note 22) 1.5 12.1 – – Finance lease debtor – 0.3 – – Other debtors 15.9 10.5 – – Other prepayments and accrued income 11.4 14.1 – – Amounts due from subsidiary undertakings – – 21.4 – Dividends receivable – – 0.2 24.8

259.4 235.9 21.6 24.8

Amounts due after more than one year:Deferred tax (Note 22) 11.3 5.2 – – Finance lease debtor – 3.1 – – Other debtors 4.6 – – –

Total debtors 275.3 244.2 21.6 24.8

Included above are amounts due from Joint Ventures of £5.7m (2003: £0.2m).

18. Current asset investmentsGroup

2004 2003£m £m

Restricted cash deposits 20.1 –Short term deposits and marketable securities 9.9 6.5Certificates of tax deposit – 0.4

Liquid investments 30.0 6.9 Land – 0.6

30.0 7.5

The restricted cash deposit relates to an interest bearing account where withdrawals are restricted under contractual obligations.

Current asset liquid investments (defined as a liquid resource for FRS 1 disclosure) are shown at market value, which is £60,000above historic cost (2003: £52,000 above historic cost).

Certificates of tax deposit in 2003 were in respect of Employee Benefit Trusts.

Notes to the financial statementscontinued

67WS Atkins plc Annual Report 2004

19. Creditors: Amounts falling due within one yearGroup Company

2004 2003 2004 2003£m £m £m £m

Loan notes 0.7 0.9 0.7 0.9 Bank loan (secured) – 47.9 – –Bank overdrafts (secured) – 2.2 – – Fees invoiced in advance 129.4 70.7 – – Trade creditors 21.0 35.0 – – Amounts due to sub-contractors 12.0 23.0 – – Amounts due to subsidiary undertakings – – 14.1 9.5 Corporation tax 13.9 2.0 1.1 – Social security and other taxation 26.1 36.0 – – Dividend payable 6.8 2.8 6.8 2.8 Hire purchase and finance leases 3.3 2.1 – – Deferred consideration on acquisitions 1.3 0.9 – – Deferred PFI/PPP bid costs recovered and development fees 0.9 0.2 – – Accruals and deferred income 90.1 66.7 – –Other creditors 26.5 12.1 – –

332.0 302.5 22.7 13.2

The total deferred consideration represents the balance outstanding in respect of the purchase of Hanscomb Inc and is afterutilisation of £0.6m of the charge for options.

Of the trade creditors and accruals above, £nil relates to the purchase of fixed assets (2003: £0.2m).

20. Creditors: Amounts falling due after more than one yearGroup

2004 2003£m £m

Bank loan repayable between two and five years (secured) 23.2 39.6Hire purchase and finance leases:

Repayable between one and two years 2.1 1.6Repayable between two and five years 3.2 2.5Repayable after more than five years 0.1 0.7

Deferred consideration – 1.1Deferred PFI/PPP bid costs recovered and development fees 28.2 5.6

56.8 51.1

The Company had no creditors falling due after more than one year (2003: nil).

21. Provisions for liabilities and chargesOnerous Vacant contracts property Pensions Total

£m £m £m £m

GroupBalance at 1 April 2003 – 4.8 17.9 22.7Charged to Profit and Loss account 4.2 4.2 20.1 28.5Provisions utilised – (2.6) – (2.6)Pension contributions – – (14.5) (14.5)

Balance at 31 March 2004 4.2 6.4 23.5 34.1

The pension provision represents the excess of accumulated costs over the amount funded.

The in-year provision for onerous contracts relates to certain PFI school facilities management contracts in the Management and Project Services segment.

No provision has been released or applied for any purpose other than that for which it was established.

68 WS Atkins plc Annual Report 2004

21. Provisions for liabilities and charges (continued)Maturity profile of provisions

2004 2003£m £m

Within one year 2.3 2.1Between one and two years 3.0 1.8Between two and five years 1.2 0.9Over five years 27.6 17.9

34.1 22.7

22. Deferred taxation2004 2003

£m £m

GroupAmounts due within one year:Accelerated depreciation 0.3 – Employee Benefit Trusts 1.3 0.8Overseas (0.3) 1.8Pension accrual – 1.8Tax losses – 7.3Other timing differences 0.2 0.4

1.5 12.1

Amounts due after more than one year:Accelerated depreciation 4.3 1.6Pension accrual 7.0 3.6

11.3 5.2

Total deferred taxation 12.8 17.3

Analysis of movement during the year:Asset at 1 April 17.3 9.3 Deferred tax (charged)/credited in profit and loss account (4.5) 8.0

Asset at 31 March 12.8 17.3

23. Share capitalGroup and Company

No. Shares £m

AuthorisedAuthorised at 1 April 2003 and 31 March 2004 ordinary shares of 0.5p 150,000,000 0.8

Issued and fully paidIssued and fully paid at 1 April 2003 99,724,022 0.5 Issue of new shares in respect of:‘A’ warrants 2,357,600 –‘B’ warrants 1,178,800‘C’ warrants 1,178,800International Sharesave 4,329 –

Issued and fully paid at 31 March 2004 104,443,551 0.5

The nominal value of the shares allotted in the year was £23,598.

Notes to the financial statementscontinued

69WS Atkins plc Annual Report 2004

23. Share capital (continued)As at the 31 March 2004 there were 5,498,429 (2003: 6,402,183) ordinary shares held by the Employee Benefit Trusts,excluding Bonus Awards made under the terms of the WS Atkins Pre-Tax Equity Participation Plan which will vest unconditionally,of which 3,000,903 (2003: 3,197,622) were being held for transfer to Directors and employees, some of which are contingenton performance conditions, under the following share incentive schemes.

Normal exercisable/ Number of Date award Exercise price transferable period awards

Name of scheme granted per share of the award outstanding

WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan 18/07/01 0.0p 18/07/04-18/07/08 22,043

WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan 21/09/01 0.0p 21/09/04-21/09/08 16,180

WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan 30/11/01 0.0p 30/11/04-30/11/11 16,483

WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan 30/06/03 0.0p 30/06/06-30/06/13 303,052

WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan 17/09/03 0.0p 01/04/07 483,500

WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan 17/09/03 0.0p 01/04/07-17/09/13 24,000

WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan 01/10/03 0.0p 01/04/07 184,000

WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan 01/10/03 0.0p 01/04/07-01/10/13 613,500

WS Atkins 1997 Executive Long Term Incentive Plan 15/06/98 0.0p 15/06/01-15/06/06 31,545WS Atkins 1997 Executive Long Term Incentive Plan 30/11/01 0.0p 30/11/04-30/11/11 18,722WS Atkins 1997 Executive Long Term Incentive Plan 29/07/02 0.0p 29/07/05-29/07/12 38,579

Lambert Smith Hampton Executive Option Scheme 16/06/99 3.99p 16/06/04-16/06/06 3,736

WS Atkins Geared Option Scheme 28/09/01 763.2p 28/09/04-28/09/11 44,182WS Atkins Geared Option Scheme 31/12/01 761.0p 31/12/04-31/12/11 42,903

WS Atkins Pre-Tax Equity Participation Plan 01/08/97 0.0p 01/08/00-01/08/04 7,480WS Atkins Pre-Tax Equity Participation Plan 16/03/98 0.0p 16/03/01-16/03/05 6,600WS Atkins Pre-Tax Equity Participation Plan 22/07/98 0.0p 22/07/01-22/07/05 10,807WS Atkins Pre-Tax Equity Participation Plan 18/07/01 0.0p 18/07/04-18/07/08 54,126WS Atkins Pre-Tax Equity Participation Plan 30/06/03 0.0p 30/06/06-30/06/13 304,382

WS Atkins Post-Tax Equity Participation Plan 01/08/97 0.0p 01/08/00-01/08/04 3,272WS Atkins Post-Tax Equity Participation Plan 22/07/98 0.0p 22/07/01-22/07/05 1,546WS Atkins Post-Tax Equity Participation Plan 18/07/01 0.0p 18/07/04-18/07/08 1,306

WS Atkins Deferred Bonus Plan 23/12/99 0.0p 23/12/04-23/12/09 17,600WS Atkins Deferred Bonus Plan 12/06/00 0.0p 12/06/03-12/06/07 9,440WS Atkins Deferred Bonus Plan 04/12/00 0.0p 04/12/03-04/12/10 4,664WS Atkins Deferred Bonus Plan 08/06/01 0.0p 08/06/04-08/06/11 31,087WS Atkins Deferred Bonus Plan 30/11/01 0.0p 25/07/04-30/11/11 5,106WS Atkins Deferred Bonus Plan 26/07/02 0.0p 26/07/06-26/07/12 16,171WS Atkins Deferred Bonus Plan 29/07/02 0.0p 29/07/05-29/07/12 61,720WS Atkins Deferred Bonus Plan 26/08/02 0.0p 26/08/05-26/08/12 184,613WS Atkins Deferred Bonus Plan 02/09/02 0.0p 31/05/05-02/09/12 107,889WS Atkins Deferred Bonus Plan 13/12/02 0.0p 13/12/05-13/12/12 21,276WS Atkins Deferred Bonus Plan 13/12/02 0.0p 13/12/06-13/12/12 165,884WS Atkins Deferred Bonus Plan 22/07/03 0.0p 22/07/06-22/07/13 108,563

70 WS Atkins plc Annual Report 2004

23. Share capital (continued)Normal exercisable/ Number of

Date award Exercise price transferable period awards Name of scheme granted per share of the award outstanding

WS Atkins Employees’ Stock Option Plan 01/06/00 622.5p 01/06/03-01/06/10 800WS Atkins Employees’ Stock Option Plan 08/06/01 832.5p 08/06/04-08/06/11 1,100WS Atkins Employees’ Stock Option Plan 29/07/02 324.0p 29/07/05-29/07/12 5,000

WS Atkins Restricted Stock Unit Plan for Key Employees 02/07/02 0.0p 02/07/05 223,226WS Atkins Restricted Stock Unit Plan for Key Employees 13/12/02 0.0p 13/12/05 30,000WS Atkins Restricted Stock Unit Plan for Key Employees 22/07/03 0.0p 22/07/06 168,314WS Atkins Restricted Stock Unit Plan for Key Employees 07/01/04 0.0p 07/01/07 42,750

WS Atkins Restricted Stock Unit Plan for Executives 02/07/02 0.0p 02/07/05 13,299WS Atkins Restricted Stock Unit Plan for Executives 02/07/02 0.0p 02/07/04 2,890

WS Atkins Sharesave Scheme 07/07/00 502.0p 01/09/03-29/02/04 1,448WS Atkins Sharesave Scheme 06/07/01 666.0p 01/09/04-01/03/05 479,594WS Atkins Sharesave Scheme 22/08/02 259.2p 01/11/05-01/05/06 600,335

WS Atkins International Sharesave Scheme 20/10/00 672.0p 20/01/04-01/07/04 48,649WS Atkins International Sharesave Scheme 22/10/01 528.0p 01/01/05-01/07/05 56,012WS Atkins International Sharesave Scheme Irish Section 20/10/00 672.0p 01/01/04-01/07/04 1,060WS Atkins International Sharesave Scheme Irish Section 22/10/01 528.0p 01/01/05-01/07/05 4,410

4,644,844Less:Sharesave options to be satisfied by new issue of shares (338,941)

WS Atkins 2003 Senior Executive and Key Employee Long Term Incentive Plan which may be satisfied by new issue of shares (1,305,000)

Shares held by the Employee Benefit Trusts to satisfy outstanding options 3,000,903

Notes to the financial statementscontinued

71WS Atkins plc Annual Report 2004

24. ReservesOther Total

Share Capital Goodwill Share profit profitpremium redemption Merger written EBT scheme and loss and loss Totalaccount reserve reserve off reserves reserve account account reserves

£m £m £m £m £m £m £m £m £m

GroupBalance at 31 March 2003 – as reported 55.4 0.2 8.7 (15.9) 1.1 – 19.7 4.9 69.2 Prior year adjustment (Note 12) – – – – 20.3 (35.0) – (14.7) (14.7)

Balance at 31 March 2003 – Restated 55.4 0.2 8.7 (15.9) 21.4 (35.0) 19.7 (9.8) 54.5 Retained profit for the year – – – – – – 28.6 28.6 28.6 Net differences on exchange – – – – – – (4.4) (4.4) (4.4)Issue of new shares 6.9 – – – – – – – 6.9 EBTs – – – – (3.4) 4.4 1.6 2.6 2.6

Balance at 31 March 2004 62.3 0.2 8.7 (15.9) 18.0 (30.6) 45.5 17.0 88.2

CompanyBalance at 31 March 2003 55.4 0.2 8.7 – – – 5.3 5.3 69.6 Retained profit for the year – – – – – – 15.9 15.9 15.9 Issue of new shares 6.9 – – – – – – – 6.9

Balance at 31 March 2004 62.3 0.2 8.7 – – – 21.2 21.2 92.4

In accordance with FRS 10, Goodwill and Intangible Assets, purchased goodwill arising on acquisitions since 1 April 1997 hasbeen capitalised. Goodwill which arose prior to 1 April 1997 amounting to £15.9m, of which positive and negative goodwilltotalled £26.3m and £10.4m respectively, has been written off to the profit and loss reserve.

Share Scheme Reserve represents 5,498,429 (2003: 6,402,183) shares in W S Atkins plc being 5.3 % of the entire issued sharecapital (2003: 6.4%). These ordinary shares have been acquired by the EBTs for the subsequent transfer to employees, and aresubstantially reserved to meet commitments under the employee incentive schemes. Based on the closing mid-market price of587 pence the market value of the above shares on 31 March 2004 was £32.3m (2003: £8.2m). The EBTs have waived theirright to dividends on these shares.

25. Related party transactionsDetails of Directors’ shareholdings and share options are given in the Remuneration report.

The Company has taken advantage of the exemption provided by FRS 8 and not disclosed transactions with subsidiaryundertakings where over 90% of the shares in the subsidiary are owned by the Company. Any such transactions have beeneliminated on consolidation.

Transactions with Joint Ventures are disclosed in Note 4.

26. Financial and capital commitments

2004 2003£m £m

Capital expenditure contracted for but not provided 1.1 0.6

In addition to the above, the Group is committed to make payments for equity and debt into Special Purpose Companies under Private Finance Initiative and Public Private Partnership contracts of £67.4m (2003: £4.3m).

Plant, machinery Land andand vehicles buildings

2004 2003 2004 2003£m £m £m £m

Operating leases:Amounts payable in the next year in respect of commitments expiring:

Within one year 1.4 1.0 2.6 5.0 Between two and five years 4.0 5.1 5.4 6.3 After five years – – 14.5 9.7

5.4 6.1 22.5 21.0

72 WS Atkins plc Annual Report 2004

27. Financial instrumentsA description of the policies relating to financial instruments is set out in the Financial review on page 24 and also in theaccounting policies on page 48.

27. a) Maturity of financial liabilitiesGroup Company

2004 2003 2004 2003£m £m £m £m

Less than one year 4.0 53.1 0.7 0.9Between one and two years 2.1 1.6 – –Between two and five years 26.4 42.1 – –More than five years 0.1 0.7 – –

32.6 97.5 0.7 0.9

Borrowing facilitiesThe Group has the following undrawn committed borrowing facilities available at 31 March in respect of which all conditionsprecedent had been met:

2004 2003£m £m

Expiring within one year – –Expiring between one and two years 5.0 –Expiring in more than two years 54.4 51.3

59.4 51.3

All of the Group’s undrawn committed borrowing facilities will be subject to floating rates of interest.

The Group’s principal borrowing facilities of £83.2m (2003: £140.0m) are secured by a fixed and floating charge over the UK assets of the Group.

Other financial liabilities included in the above table are overdrafts, loan notes and finance lease balances as shown in Notes 19 and 20.

The Group’s liability with respect to deferred consideration, which is free of interest, is excluded from the above table anddescribed in Note 19.

27. b) Currency exposuresTo mitigate the effect of currency exposures arising from its net investment in the USA, the Group has financed part of itsinvestment by borrowing in US Dollars.

The table below shows the extent to which Group companies have monetary assets and liabilities in currencies other than theirlocal currency.

Net foreign currency monetary assets/(liabilities)Other Total

Sterling US$ EU currencies 2004As at 31 March 2004 £m £m £m £m £m

Functional currency of Group operationSterling – (16.5) (0.5) (2.1) (19.1)US Dollar – – – – – Euro 0.5 (0.1) – 0.1 0.5 Other currencies 0.6 1.1 – 0.4 2.1

Total 1.1 (15.5) (0.5) (1.6) (16.5)

Net foreign currency monetary assets/(liabilities)Other Total

Sterling US$ EU currencies 2003As at 31 March 2003 £m £m £m £m £m

Functional currency of Group operationSterling – (0.2) – – (0.2)US Dollar – – – – – Euro – – – – – Other currencies 1.2 0.2 0.1 (0.4) 1.1

Total 1.2 – 0.1 (0.4) 0.9

Notes to the financial statementscontinued

73WS Atkins plc Annual Report 2004

27. Financial instruments (continued)27. c) Financial assets and liabilities

AssetsThe following analysis excludes short-term debtors, cash held on behalf of sub-contractors and funds held by the EmployeeBenefit Trusts and deferred tax.

Total TotalSterling Euro US Dollar Danish Krone S African Rand 2004 2003

£m £m £m £m £m £m £m

Fixed rate 7.0 – – – – 7.0 8.1 Floating rate 80.9 2.0 1.4 2.9 6.8 94.0 17.5

Total 87.9 2.0 1.4 2.9 6.8 101.0 25.6

LiabilitiesThe interest rate profile of the Group’s financial liabilities, excluding short-term creditors, at 31 March 2004 was as follows:

Floating Fixed rate Floating Fixed raterate finance rate finance

liabilities leases Total liabilities leases Total2004 2004 2004 2003 2003 2003

£m £m £m £m £m £m

Sterling 6.4 3.0 9.4 55.3 2.6 57.9 US Dollar 16.8 – 16.8 31.3 – 31.3 Euro 1.4 – 1.4 1.4 – 1.4 Danish Krone 5.0 – 5.0 6.9 – 6.9

Total 29.6 3.0 32.6 94.9 2.6 97.5

The weighted average interest rate on the fixed rate finance leases is 8.5%, over a weighted average period of 48 months.

The Group’s liability with respect to the deferred consideration and provisions, which are free of interest, is excluded from theabove table and described in Note 19.

Fair valuesThe fair value of the assets and liabilities of the Group, with the exception of the forward currency contracts, are considered tobe materially equivalent to their book value. The fair values of these assets and liabilities have been determined by discountingfuture cashflows of the relevant financial instrument at the Group’s incremental borrowing rate. The forward currency contractsare used to manage the Group’s forward currency risk.

Financial instruments held for trading purposesThe fair value of forward currency contracts at the year-end, based on their market value, is detailed below.

2004 2004 2003 2003Book value Fair value Book value Fair value

£m £m £m £m

Forward currency hedges 13.9 14.1 1.2 1.2

The Group did not use any derivative instrument other than the forward currency contracts during the year or at the year-end.

28. Contingent liabilitiesThe Group has given indemnities in respect of overseas office overdrafts, performance bonds, advance payment bonds, Letters of Credit and import duty guarantees issued on its behalf. The amount outstanding at 31 March 2004 was £113.8m(2003: £62.6m) including £59.6m in respect of the Metronet PPP companies (2003: £nil). The indemnities, which arose in theordinary course of business, are not expected to result in any material financial loss.

74 WS Atkins plc Annual Report 2004

29. Pension schemes29. a) SSAP 24 PensionsThe Group operates both defined benefit and defined contribution schemes, which are mainly in the United Kingdom.

Membership of the Group’s principal pension schemes is as follows:

Defined Benefit Schemes Defined Contribution SchemesAtkins Staff Scheme Railways Scheme Atkins Staff Scheme F&G2004 2003 2004 2003 2004 2003 2004 2003

No. No. No. No. No. No. No. No.

Members 3,817 4,450 568 605 3,711 3,041 735 513Deferred pensioners 5,593 5,251 280 353 827 535 457 429Pensioners 1,772 1,620 103 89 – – – –

11,182 11,321 951 1,047 4,538 3,576 1,192 942

The defined benefit section of the Atkins Staff Scheme is closed to new entrants, who are now offered membership of thedefined contribution section.

The latest full actuarial valuation of the defined benefits section of the Atkins Staff Scheme was at 1 April 2001. However aninterim actuarial assessment was undertaken by an independent actuary as at 30 September 2003 the results of which havebeen used to evaluate the 2004 SSAP 24 pension charge.

The main assumptions used for the September 2003 SSAP 24 assessment are listed in the table below (with 2001 valuationassumptions as comparatives).

2003 2001

Rate of Inflation 2.50% 3.00%Real pension increases:

– Fixed 2.40% 2.00%– Limited price indexation 0% 0%

Real salary increases 1.50% 1.50%Real investment return:

– Future service 4.00% 4.25%– Past service 4.25% 3.50%

Under SSAP 24 assumptions the total market value of the assets at the date of the 2001 Valuation was £374.5m and theactuarial value of the assets was sufficient to cover approximately 105% of the benefits that had accrued to members allowingfor assumed future increases in earnings. The market value of the assets at the date of the September interim assessment was£370.0m, and the approximate past service shortfall was £65.0m, equivalent to a past service funding level of 85%. For thepurposes of SSAP 24 the shortfall is being amortised as a level percentage of salary over the estimated service lives of currentemployees in the scheme through to 2019. As the scheme is now closed to new entrants the current service costs, under theprojected unit valuation method, will increase as a percentage of salary as members of the scheme approach retirement,although the overall cost of the scheme will decrease as the number of members decreases.

The most recent triennial full valuation of the Railways Pension Scheme took place at 31 December 2001. Based on the 2001SSAP 24 assumptions in the above table, the total market value of the assets at the date of the valuation was sufficient tocover approximately 128% of the benefits that had accrued to members allowing for assumed future increase in salaries. The actuarial assessment undertaken at 30 September 2003 (using the 2003 SSAP 24 assumptions noted above) identifiedassets of £97.0m and an excess of assets over accrued liabilities (“surplus”) of £18.5m. This surplus is being amortised as a level percentage of salary over the estimated service lives of current employees in the Scheme through to 2016. In additionthere is a pension prepayment, representing the excess of the amount funded over the accumulated pension cost, of £2.5m(2003: £2.6m). This has been netted with the pension provisions of the other defined benefit schemes and included inprovisions for liabilities and charges.

Other pension schemes include the Atkins McCarthy Pension scheme in Eire (closed to new entrants) and a range of definedcontribution schemes or equivalent in a number of other overseas subsidiaries.

Notes to the financial statementscontinued

75WS Atkins plc Annual Report 2004

29. Pension schemes (continued)29. a) SSAP 24 Pensions (continued)The costs of the pension schemes under current accounting standard SSAP 24 are shown below:

2004 2003£m £m

Regular pension cost 22.2 20.9Less Employees’ contribution (5.7) (6.7)

Employer’s regular pension cost 16.5 14.2Atkins Staff Scheme 13.1 11.2Railways Scheme 3.0 2.6Other 0.4 0.4

Amortisation of deficit/(surplus) 3.4 (3.7)Atkins Staff Scheme 5.1 (1.4)Railways Scheme (1.7) (2.3)

Net pension cost of defined benefit schemes 19.9 10.5Cost of defined contribution schemes 9.2 7.7 Unfunded pension promise 0.2 (0.2)

Total pension cost 29.3 18.0

The net cost of the defined benefit schemes was £19.9m, an increase of £9.4m from the previous year analysed as follows:

£m

Impact of 2003 Interim Assessment:Regular pension cost 3.9Amortisation of surplus/(deficit) 7.5

Membership changes and salary increases (net) (2.0)

Net increase in cost 9.4

Following the 2003 interim assessment and advice from the Group’s actuary, total contributions into the Atkins Staff Schemehave been reviewed. With effect from April 2004 the Group will pay an additional £3.5m per annum and employee contributionswill be increased. Employee contribution rates will be further increased in April 2005. The combination of the additional staffcontributions and the £3.5m per annum company contribution is estimated to eliminate the past service shortfall over a periodof 15 years. Employer contributions will be subject to review following the full valuation being carried out as at 1 April 2004.No additional funding is currently required by the Railways Scheme.

The next full triennial actuarial valuation is at 1 April 2004 for the Atkins Staff Scheme and at 1 January 2005 for the Railways Scheme.

A provision of £23.5m (which incorporates the unfunded pension promise) is included in provisions for liabilities and chargesrepresenting the excess of accumulated pension cost over the amount funded (2003: £17.9m).

The pension cost of the defined contribution schemes was £9.2m, an increase of £1.5m. This is mainly the result of increasedmembership as the majority of new staff are offered membership of the defined contribution schemes following the closure of the defined benefits scheme to new entrants.

76 WS Atkins plc Annual Report 2004

29. Pension schemes (continued)29. b) Financial Reporting Standard 17 – Retirement Benefits (FRS 17)The disclosures required under FRS 17 are shown below. These relate to the main UK schemes (Atkins Staff Scheme and theRailways Scheme) but they would not be materially different if they included the defined benefit scheme which operates overseas.

The latest full actuarial valuation was conducted as at 1 April 2001 for the Atkins Staff Scheme and as at 31 December 2001for the Railways Scheme. These have been updated to 31 March 2004 by a qualified independent actuary. The principalassumptions used by the actuary were as follows:

At 31 At 31 At 31March 2004 March 2003 March 2002

Rate of increase in salaries(1) 4.25% 3.90% 4.00%Rate of increase of pensions in payment

– Limited price indexation 2.75% 2.40% 2.50%– Fixed 5% 5.00% 5.00% 5.00%

Rate of increase of deferred pensions 2.75% 2.40% 2.50%Discount rate 5.50% 5.40% 6.00%Inflation assumption 2.75% 2.40% 2.50%

(1) plus 0.75% p.a. promotional salary scale for the Railways Scheme.

The assets in the schemes and the expected rate of return as at 31 March were:2004

Long Atkinsterm Staff Railways

rate of Scheme Scheme Totalreturn £m £m £m

Assets at market valueEquities 8.00% 252.9 88.4 341.3Bonds 5.10% 118.3 10.8 129.1Property 6.80% – 7.5 7.5Other/cash 4.00% 20.0 0.2 20.2

Total market value of assets 391.2 106.9 498.1Present value of scheme liabilities (607.6) (121.2) (728.8)

Deficit in scheme (216.4) (14.3) (230.7)Related deferred tax asset 64.9 4.3 69.2

Net pension liability (151.5) (10.0) (161.5)

2003Long Atkinsterm Staff Railways

rate of Scheme Scheme Totalreturn £m £m £m

Assets at market valueEquities 8.00% 199.5 70.3 269.8Bonds 4.80% 123.0 5.9 128.9Property 6.70% – 6.3 6.3Other/cash 3.75% 4.6 0.6 5.2

Total market value of assets 327.1 83.1 410.2Present value of scheme liabilities (530.7) (99.7) (630.4)

Deficit in scheme (203.6) (16.6) (220.2)Related deferred tax asset 61.1 5.0 66.1

Net pension liability (142.5) (11.6) (154.1)

Notes to the financial statementscontinued

77WS Atkins plc Annual Report 2004

29. Pension schemes (continued)29. b) Financial Reporting Standard 17 – Retirement Benefits (FRS 17) (continued)

2002Long Atkinsterm Staff Railways

rate of Scheme Scheme Totalreturn £m £m £m

Assets at market valueEquities 7.90% 253.7 93.5 347.2Bonds 5.30% 111.9 7.2 119.1Property 7.10% 0.7 5.7 6.4Other/cash 4.00% 12.1 0.9 13.0

Total market value of assets 378.4 107.3 485.7Present value of scheme liabilities (396.1) (96.5) (492.6)

(Deficit)/Surplus in scheme (17.7) 10.8 (6.9)Related deferred tax asset/(liability) 5.3 (3.2) 2.1

Net pension (liability)/asset (12.4) 7.6 (4.8)

The following amounts would have been recognised in the performance statements in the year to 31 March 2004 under therequirements of FRS 17.

2004 2003Atkins Atkins

Staff Railways Total Staff Railways TotalScheme Scheme 2004 Scheme Scheme 2003

£m £m £m £m £m £m

Impact on operating profitCurrent service cost (17.3) (2.9) (20.2) (15.9) (2.6) (18.5)

Impact on other finance income/(charges)Expected return on pension scheme assets 22.2 3.8 26.0 28.1 5.0 33.1Interest on pension scheme liabilities (28.3) (3.3) (31.6) (23.6) (3.6) (27.2)

Net return (6.1) 0.5 (5.6) 4.5 1.4 5.9

Total profit and loss impact (23.4) (2.4) (25.8) (11.4) (1.2) (12.6)

Statement of total recognised gains and losses(Gain)/loss on pension scheme assets (39.0) (10.2) (49.2) 90.9 20.2 111.1% of assets at end of period -10% -10% -10% 28% 24% 27%Experience losses/(gains) arising

on the scheme liabilities – 2.8 2.8 28.9 1.0 29.9% of liabilities at end of period – 2% 0% 5% 1% 5%(Gain)/loss on changes in assumptions underlyingthe present value of the scheme liabilities 41.3 3.9 45.2 69.4 6.3 75.7

Actuarial loss/(gain) recognised 2.3 (3.5) (1.2) 189.2 27.5 216.7

% of liabilities at end of period 0% 3% 0% 36% 27% 33%

78 WS Atkins plc Annual Report 2004

29. Pension schemes (continued)29. b) Financial Reporting Standard 17 – Retirement Benefits (FRS 17) (continued)If the above amounts had been recognised in the financial statements the Group’s net assets and profit and loss accountreserve at 31 March would be as follows:

Restated(1)

2004 2003£m £m

Net assetsNet assets 88.7 55.0Adjust for SSAP 24 provision (net of deferred tax) 16.2 12.4FRS 17 Pension liability (net of deferred tax) (161.5) (154.1)

Net liabilities including FRS 17 pension liability (56.6) (86.7)

ReservesProfit and loss reserve 17.0 (9.8)Adjust for SSAP 24 provision (net of deferred tax) 16.2 12.4FRS 17 Pension liability (net of deferred tax) (161.5) (154.1)

Profit and loss account reserve including FRS 17 pension liability (128.3) (151.5)

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

Movement in the pension scheme deficit during the year:

2004 2003Atkins Atkins

Staff Railways Total Staff Railways TotalScheme Scheme 2004 Scheme Scheme 2003

£m £m £m £m £m £m

At 1 April (203.6) (16.6) (220.2) (17.7) 10.8 (6.9)Current service cost (17.3) (2.9) (20.2) (15.9) (2.6) (18.5)Contributions 12.9 1.2 14.1 14.7 1.3 16.0Past service costs – – – – – – Net finance income/(charge) (6.1) 0.5 (5.6) 4.5 1.4 5.9Actuarial gain/(loss) (2.3) 3.5 1.2 (189.2) (27.5) (216.7)

At 31 March (216.4) (14.3) (230.7) (203.6) (16.6) (220.2)

30. Cash flow30. a) Reconciliation of net cash flow to movement in funds

2004 2003£m £m

Cash increase 47.7 30.3Cash outflow due to lease repayments 3.0 2.7Cash outflow/(inflow) from change in liquid resources 23.1 (1.7)Cash outflow/(inflow) from change in short-term loans (non-EBT) 47.9 (33.0)Cash outflow from redemption of loan stock 0.2 0.8 Cash outflow/(inflow) from change in long-term loans 13.5 (4.6)

Decrease/(increase) in net debt resulting from cash flows 135.4 (5.5)

(Increase) in net debt from new finance leases (4.8) (3.6)Increase in current asset investment market value – 0.1Translation difference (1.2) 0.5

Increase/(decrease) in net funds in period 129.4 (8.5)Net debt at 1 April (45.8) (37.3)

Net funds/(debt) at 31 March 83.6 (45.8)

Notes to the financial statementscontinued

79WS Atkins plc Annual Report 2004

30. b) Reconciliation of operating profit to net cash inflow/(outflow) from operating activities

Restated(1)

2004 2003£m £m

Operating profit/(loss) 34.5 (50.0)Operations including amortisation of goodwill 34.7 (49.9)Employee Benefit Trusts (0.2) (0.1)

Depreciation charges 19.0 22.2Release of deferred income (5.6) –Impairment of fixed assets – 1.8Amortisation of goodwill 7.8 11.1Impairment of goodwill – 30.7Options charge 1.3 – (Profit)/loss on disposal of tangible fixed assets (0.1) 0.4(Profit) on disposal of current asset non-liquid investments – (0.1)(Increase)/decrease in stocks (0.1) 0.4(Increase)/decrease in debtors (31.5) 9.0 Increase/(decrease) in other creditors due within one year 69.5 (4.2)(Decrease)/increase in other creditors due after one year (0.8) 0.6 Increase in other provisions for liabilities and charges 6.0 4.6Exchange rate effect on current assets – (0.6)

100.0 25.9Increase/(decrease) in pension fund provision 5.4 (5.8)

105.4 20.1 Operations 104.9 19.5 Employee Benefit Trusts 0.5 0.6

(Decrease)/increase in amounts due to sub-contractors (11.0) 6.5

Net cash inflow from operating activities 94.4 26.6

Continuing Operations 96.6 22.8Discontinued Operations (2.2) 3.8

(1) Restated for UITF 38 (Accounting for ESOP Trusts) and UITF 17, as amended, (Employee Share Schemes), see Note 12.

80 WS Atkins plc Annual Report 2004

30. c) Analysis of net funds/(debt)At Other At

31 March Cash non-cash Exchange 31 March2003 flow changes movement 2004

£m £m £m £m £m

Cash at bank and in hand 19.1 56.0 – (4.1) 71.0 Bank overdrafts (2.2) 2.2 – – – Current asset liquid investments 6.5 23.5 – – 30.0 Debt due within one year (48.8) 48.1 – – (0.7)Debt due after one year (39.6) 13.5 – 2.9 (23.2)Finance leases (6.9) 3.0 (4.8) – (8.7)

Total (71.9) 146.3 (4.8) (1.2) 68.4

Cash held on behalf of sub-contractors 23.0 (11.0) – – 12.0 EBT – cash 2.7 0.5 – – 3.2 Current asset liquid investments:

EBT – certificate of tax deposit 0.4 (0.4) – – –

(45.8) 135.4 (4.8) (1.2) 83.6

Bank balances and cashflows as shown on the balance sheet and cashflow:Cash at bank and in hand 19.1 56.0 – (4.1) 71.0 Cash held on behalf of sub-contractors 23.0 (11.0) – – 12.0 Employee Benefit Trusts 2.7 0.5 – – 3.2

Cash as shown on balance sheet 44.8 45.5 – (4.1) 86.2 Overdrafts (2.2) 2.2 – – –

Net cash and cashflow 42.6 47.7 – (4.1) 86.2

31. Subsidiary undertakingsThe following companies were the principal subsidiary undertakings as at 31 March 2004:

Country of Class andregistration/ percentage

incorporation of shares held Nature of business

ATMOS Limited England & Wales 100% ordinary Maintenance servicesFaithful & Gould Limited(1) England & Wales 100% ordinary Quantity surveyors and

cost estimatorsLambert Smith Hampton Group Limited(1) England & Wales 100% ordinary Property consultantsWS Atkins (Services) Limited England & Wales 100% ordinary Group service companyWS Atkins (UK Holdings) Limited England & Wales 100% ordinary Management activities

holding companyWS Atkins Consultants Limited(1) England & Wales 100% ordinary Consulting engineersWS Atkins Facilities Management Limited England & Wales 100% ordinary Property servicesWS Atkins International Limited England & Wales 100% ordinary Consulting engineersWS Atkins Investments Limited(1) England & Wales 100% ordinary Investment companyWS Atkins Planning and Management Consultants Limited England & Wales 100% ordinary Consulting engineersWS Atkins Rail Limited England & Wales 100% ordinary Design engineers for the

railways industryAtkins Metro Limited England & Wales 100% ordinary Holding companyHanscomb Inc.(1) USA 100% ordinary Project and programme

management consultantsAtkins China Limited China 100% ordinary Consulting engineersWS Atkins & Partners Overseas(1) Gibraltar 100% ordinary Consulting engineersWS Atkins Insurance (Guernsey) Limited Guernsey 100% ordinary InsuranceAtkins Danmark A/S(1) Denmark 100% ordinary Transport and engineering

consultants

(1) The equity of these subsidiary undertakings is held by another subsidiary undertaking.

Notes to the financial statementscontinued

81WS Atkins plc Annual Report 2004

31. Subsidiary undertakings (continued)The percentage of the issued share capital held by the Group is equivalent to the percentage of voting rights held. The Groupholds the whole of all classes of issued share capital.

All the above operate in the country of registration, except for WS Atkins & Partners Overseas which operates in the UnitedArab Emirates.

All of the above are included in the consolidated result of the Group.

Following an internal reorganisation on 31 March 2004, the trade and assets of WS Atkins Consultants Limited, WS AtkinsPlanning and Management Consultants Limited, ATMOS Limited and WS Atkins Rail Limited were transferred to WS Atkins(Services) Limited (subsequently renamed Atkins Limited).

On 1st June 2004 the following companies changed their name:WS Atkins (Services) Limited, changed to Atkins Limited.WS Atkins Consultants Limited, changed to Atkins Consultants Limited.WS Atkins Facilities Management Limited, changed to Atkins Facilities Management Limited.WS Atkins Planning and Management Consultants Limited, changed to Atkins Planning and Management Consultants Limited.WS Atkins Rail Limited, changed to Atkins Rail Limited.

A full list of subsidiary companies will be filed at Companies House.

32. Joint VenturesThe following represents the principal Joint Ventures in which the Group participated during the year:

Date of Proportion last audited

of shares financial External Name Nature of business held(1) statements auditors

TFMC (Proprietary) Limited(2) Company involved in providing full facilities 38.25% 30 June Fisher Hoffman PKFmanagement services in South Africa. effective 2003

Connect Roads Limited(2) Holding company for companies involved 32.14% 31 March Deloitte & Touche LLPin the design and build, financing, operation 2003and maintenance of roads in the UK.

Connect M77/GSO Holdings Limited(2) Holding company for companies involved 33% Not yet Deloitte & Touche LLPin the design and build, financing, operation publishedand maintenance of the M77 in Scotland.

Mercia Healthcare (Holdings) Limited Holding company for companies involved 25% 31 March Pricewaterhouse-in the design and build of hospital 2003 Coopers LLPaccommodation and the provision of full services to the accommodation within which the NHS may provide core clinical services.

South Manchester Healthcare Holding company for companies involved 25% 31 March Pricewaterhouse-(Holdings) Limited in the design and build of hospital 2003 Coopers LLP

accommodation and the provision of full services to the accommodation within which the NHS may provide core clinical services.

Total Solutions for Industry Limited Joint Venture to provide Industrial 50% 31 Dec Deloitte & Touche LLPPFI-type solutions. 2002

DG 21 LLC Delaware limited liability company involved 24.5% 31 Dec Deloitte & Touche LLPin the provision of all non-core services 2002for the US Navy Facility at Diego Garcia. Indepen-The principal place of business is 4801 dent Spring Valley Road, Suite 125B, Dallas, review Texas 75244 only.

82 WS Atkins plc Annual Report 2004

32. Joint Ventures (continued)

Date of Proportion last audited

of shares financial External Name Nature of business held(1) statements auditors

NewSchools Limited(2) Management services company for companies 50% 31 March Deloitte & Touche LLPinvolved in the design and build of school 2003accommodation and the provision of full services to the accommodation within which the LEA may provide teaching.

NewSchools (Cornwall) Provision of design and build, financing and 40% 31 March Deloitte & Touche LLPHoldings Limited(2) operating services to 32 schools in Cornwall. 2003

NewSchools (Leyton) Provision of design and build, financing and 42.5% 31 March Deloitte & Touche LLPHoldings Limited(2) operating services to a new secondary school 2003

in the London Borough of Waltham Forest.

NewSchools (Penweddig) Provision of design and build, financing and 42.5% 31 March Deloitte & Touche LLPHoldings Limited operating services to a new secondary school 2003

in Aberystwyth, Wales.

NewSchools (Swanscombe) Provision of design and build, financing and 65%(3) 31 March Deloitte & Touche LLPHoldings Limited(2) operating services to two new schools in 2003

Swanscombe, Kent.

NewSchools (Merton) Provision of design and build, financing and 42.5% 31 March Deloitte & Touche LLPHoldings Limited(2) operating services to six secondary schools 2003

in the London Borough of Merton.

RMPA Holdings Limited Holding company for companies involved in 14% Not yet KPMG LLPthe design, financing and construction of publishedthe MoD garrison facility at Colchester.

Sonico Limited Provide construction and hire of water 45% 31 March Pricewaterhouse-treatment plants. 2003 Coopers LLP

Trans4m Limited Managing contractor for the provision of 25% 31 March Grant Thorntonrefurbishment and modernisation of station 2003assets and the maintenance and remediation of civil assets as part of the LUL PPP.

Metronet BCV Holdings Holding company for the infraco which has 20% Not yet Deloitte & Touche LLPLimited contracted with LUL for the repairs, published

refurbishment and modernisation of part of the London Underground.

Metronet SSL Holdings Holding company for the infraco which has 20% Not yet Deloitte & Touche LLPLimited contracted with LUL for the repairs, published

refurbishment and modernisation of part of the London Underground.

Optima (unincorporated) Undertakes motorway and trunk road 50% n/a n/amaintenance and management for the Highways Agency’s Area 11 network, operating in the Midlands.

All Joint Ventures operate in the United Kingdom unless otherwise stated.

(1) Proportion of shares held are in respect of ordinary share capital.(2) Sold in year.(3) Restricted voting rights.

Notes to the financial statementscontinued

83WS Atkins plc Annual Report 2004

Restated(1) Restated(1) Restated(1) Restated(1)

2004 2003 2002 2001 2000£m £m £m £m £m

Turnover: Group and Share of Joint Ventures 1,241.8 1,012.2 880.9 711.7 525.3Less: Share of Joint Ventures’ turnover (250.0) (76.9) (74.6) (38.3) (9.0)

Turnover 991.8 935.3 806.3 673.4 516.3Cost of sales (619.2) (576.1) (546.1) (420.7) (331.9)

Gross profit 372.6 359.2 260.2 252.7 184.4 Administrative expenses (338.1) (409.2) (246.5) (227.0) (158.6)

Operating profit/(loss) 34.5 (50.0) 13.7 25.7 25.8Operations 42.5 (8.1) 24.6 37.9 32.7Amortisation and impairment of goodwill (7.8) (41.8) (9.4) (8.9) (4.6)Employee Benefit Trusts (0.2) (0.1) (1.5) (3.3) (2.3)

Share of operating profit in Joint Ventures 32.8 14.2 14.5 8.7 3.2Profit on sale of subsidiary undertaking Joint Ventures 13.5 – – – –

Interest receivable and similar income 15.7 6.3 3.6 3.7 3.6Operations 3.4 3.8 3.0 3.5 3.5Joint Ventures 12.3 2.5 0.6 0.2 0.1

Interest payable and similar charges (34.5) (15.8) (11.1) (8.1) (3.6)Operations (10.0) (5.8) (3.6) (3.5) (1.2)Joint Ventures (24.5) (10.0) (7.5) (4.6) (2.4)

Profit/(loss) on ordinary activities before taxation 62.0 (45.3) 20.7 30.0 29.0 Operations 49.3 (10.1) 23.8 37.8 35.1 Joint Ventures 20.6 6.7 7.6 4.3 0.9 Amortisation and impairment of goodwill (7.8) (41.8) (9.4) (8.9) (4.6)Employee Benefit Trusts (0.1) (0.1) (1.3) (3.2) (2.4)

Taxation on profit/(loss) on ordinary activities (24.6) 7.3 (9.1) (11.5) (11.1)Operations (18.5) 9.1 (7.0) (10.3) (10.9)Joint Ventures (6.1) (1.8) (2.1) (1.2) (0.2)

Profit/(loss) on ordinary activities after taxation 37.4 (38.0) 11.6 18.5 17.9Operations 30.7 (1.1) 15.5 25.7 22.5 Joint Ventures 14.5 4.9 5.5 3.1 0.7 Amortisation and impairment of goodwill (7.8) (41.8) (9.4) (8.9) (4.6)Employee Benefit Trusts – – – (1.4) (0.7)

Dividends (8.8) (2.8) (10.2) (9.9) (8.8)

Retained profit/(loss) for the year 28.6 (40.8) 1.4 8.6 9.1

Basic earnings/(loss) per share 38.8p (41.1)p 12.8p 20.5p 20.7pFully diluted earnings per share 38.3p (41.1)p 12.5p 19.9p 19.8pEarnings per share before amortisation of goodwill,

flotation costs, exceptional restructuring costs onacquisition and the Employee Benefit Trusts 39.9p 16.5p 31.4p 30.2p 26.5p

Dividends per share 9.0p 3.00p 11.34p 10.80p 10.00p

(1) All comparatives restated following adoption of FRS 19, UITF 34, UITF 38 and UITF 17, as amended.

Five year summaryConsolidated profit and loss account for years ended 31 March

84 WS Atkins plc Annual Report 2004

Five year summary (continued)Consolidated balance sheet as at 31 March

Restated(1) Restated(1) Restated(1) Restated(1)

2004 2003 2002 2001 2000£m £m £m £m £m

Fixed assetsIntangible assets 36.8 49.5 72.7 75.3 81.0 Tangible assets 56.9 65.4 74.5 34.9 29.3Investments in Joint Ventures 25.9 19.5 17.4 11.2 5.9Investments – other – – 0.7 0.1 0.1

119.6 134.4 165.3 121.5 116.3Current assetsStocks 0.5 0.4 0.8 0.2 0.3 Debtors 275.3 244.2 228.8 188.0 161.9 Investments 30.0 7.5 9.3 17.3 15.6 Cash at bank and in hand 86.2 44.8 25.8 71.0 52.6

392.0 296.9 264.7 276.5 230.4

Current liabilitiesCreditors: amounts falling due within one year (332.0) (302.5) (276.3) (231.3) (197.0)

Net current assets/(liabilities) 60.0 (5.6) (11.6) 45.2 33.4

Total assets less current liabilities 179.6 128.8 153.7 166.7 149.7

Creditors: amounts falling due after one year (56.8) (51.1) (43.4) (40.5) (40.4)

Provisions for liabilities and charges (34.1) (22.7) (23.9) (29.1) (24.0)

88.7 55.0 86.4 97.1 85.3

Capital and reservesCalled up share capital 0.5 0.5 0.5 0.5 0.5 Share premium account 62.3 55.4 42.1 41.0 37.3 Capital redemption reserve 0.2 0.2 0.2 0.2 0.2 Merger reserve 8.7 8.7 8.7 8.7 8.7 Profit and loss account 17.0 (9.8) 34.9 46.7 38.6

Shareholders’ funds – equity interests 88.7 55.0 86.4 97.1 85.3

(1) All comparatives restated following adoption of FRS 19, UITF 34, UITF 38 and UITF 17, as amended.

85WS Atkins plc Annual Report 2004

Restated(1) Restated(1) Restated(1) Restated(1)

2004 2003 2002 2001 2000£m £m £m £m £m

Operating profit/(loss) 34.5 (50.0) 13.7 25.7 25.8 Operations 42.5 (8.1) 24.6 37.9 32.7 Amortisation and impairment of goodwill (7.8) (41.8) (9.4) (8.9) (4.6)Flotation costs – – – – – Restructuring costs on acquisition – – – – – Employee Benefit Trusts (0.2) (0.1) (1.5) (3.3) (2.3)

Depreciation and impairment charges 19.0 22.2 17.1 11.5 9.3 Impairment of fixed assets – 1.8 – – –Amortisation of goodwill 7.8 11.1 9.4 8.9 4.7Impairment of goodwill – 30.7 – – – Release of deferred income (5.6) – – – – Charge for options 1.3 – 2.0 4.7 5.1 (Profit)/Loss on disposal of tangible fixed assets (0.1) 0.4 (0.3) (0.7) (0.4)(Profit) on disposal of current asset investments – – (0.1) (0.3) 0.5 (Profit) on disposal of current asset non-liquid investments – (0.1) (0.7) – – (Increase)/decrease in stocks (0.1) 0.4 (0.6) 0.1 (0.1)(Increase)/decrease in debtors (31.5) 9.0 (42.2) (22.1) (45.4)Increase/(decrease) in other creditors due within one year 69.5 (4.2) 35.0 15.6 13.6 Increase in other creditors due after one year (0.8) 0.6 1.2 0.5 0.8 Increase in other provisions for liabilities and charges 6.0 4.6 – – 0.2 Increase/(decrease) in pension fund provision 5.4 (5.8) (5.2) 5.1 5.2 Exchange rate effect – (0.6) – 0.1 –

105.4 20.1 29.3 49.1 19.3 Operations 104.9 19.5 29.6 47.2 19.0 Employee Benefit Trusts 0.5 0.6 (0.3) 1.9 0.3

(Decrease)/increase in amounts due to contractors (11.0) 6.5 (9.0) 12.1 1.5

Net cash inflow from operating activities 94.4 26.6 20.3 61.2 20.8

Dividends received from Joint Ventures 2.9 6.5 0.8 0.6 –

Returns on investments and servicing of finance (4.5) (2.2) (0.4) 0.5 3.0

Taxation paid (3.1) (1.8) (11.0) (12.2) (14.4)

Capital expenditure and financial investment 27.3 (18.8) (66.6) (19.1) (5.8)

Acquisitions and disposals 23.2 (9.4) (9.6) (1.3) (61.6)

Equity dividends paid (4.8) (6.6) (8.9) (8.1) (8.0)

Management of liquid resources (23.1) 1.7 7.8 (1.4) 49.1

Financing (64.6) 34.3 12.5 (1.8) 17.8

Increase/(decrease) in cash 47.7 30.3 (55.1) 18.4 0.9

(1) All comparatives restated following adoption of FRS 19, UITF 34, UITF 38 and UITF 17, as amended.

Five year summary (continued)Consolidated cash flow for years ended 31 March

WS Atkins plc Annual Report 2004

Restated(1) Restated(1) Restated(1) Restated(1)

2004 2003 2002 2001 2000£m £m £m £m £m

Increase/(decrease) in cash 47.7 30.3 (55.1) 18.4 0.9 Cash outflow from decrease in lease financing 3.0 2.7 2.9 3.1 1.5 Cash used to increase/(decrease) liquid resources 23.1 (1.7) (7.8) 1.4 (49.1)Cash outflow/(inflow) from short-term loans (non-EBT) 47.9 (33.0) (12.3) (1.9) (0.6)Cash outflow from redemption of loan stock 0.2 0.8 0.4 0.7 – Cash outflow from short-term EBT loans – – – – 3.0 Cash outflow/(inflow) from long-term loans 13.5 (4.6) (3.4) (0.1) (28.3)

Change in net funds/(net debt) resulting from cash flows 135.4 (5.5) (75.3) 21.6 (72.6)

(Decrease) in funds from new finance leases acquired – – – – (5.0)(Decrease) in funds from new finance leases taken out (4.8) (3.6) (2.9) (2.6) (3.1)(Decrease) in funds from loan note issue – – – – (2.8)Increase/(decrease) in current asset investment market value – 0.1 (0.2) 0.4 (0.3)Profit/(loss) on sale of current asset investments – – 0.1 (0.1) (0.5)Translation differences (1.2) 0.5 0.1 (2.1) (0.8)

Movement in net funds/(net debt) in year 129.4 (8.5) (78.2) 17.2 (85.1)Net funds/(net debt) at 1 April (45.8) (37.3) 40.9 23.7 108.8

Net funds/(net debt) at 31 March 83.6 (45.8) (37.3) 40.9 23.7

(1) All comparatives restated following adoption of FRS 19, UITF Abstract 34, UITF 38 and UITF 17, as amended.

Five year summary (continued)Reconciliation of net cash flow to movement in net debt

86

87WS Atkins plc Annual Report 2004

Investors’ information

Annual General MeetingThe AGM will be at 4.30pm on 7 September 2004 at theConference Centre, WS Atkins plc, Woodcote Grove, Ashley Road,Epsom, Surrey KT18 5BW. The full Notice of the Meeting andattendance/proxy card are enclosed with this report.

Group Company Secretary and registered officeAmanda Massie, WS Atkins plc, Woodcote Grove, Ashley Road,Epsom, Surrey, KT18 5BW.

Shareholder servicesRegistrarAdministrative enquiries about the holding of WS Atkins plc sharesshould be directed in the first instance to the Registrar whoseaddress is The Registrar, Registration Department, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU. Telephone: 0870 162 3100. Website: www.capitaregistrars.com

Share dealing serviceDetails of a postal dealing service can be obtained from: WS Atkins plcShare Dealing Service, Cazenove & Co. Ltd, 20 Moorgate, London,EC2R 6DA. Telephone: 020 7155 5155.

Dividend reinvestment plan (DRIP)The Company offers a dividend reinvestment plan to shareholdersas a dividend alternative. Participation in the DRIP scheme isvoluntary and you may join or withdraw at any time. Should youwish to participate in the DRIP scheme please contact the Registraron 0870 162 3100 to request a form of mandate and an explanatorybooklet. Your completed mandate form must be received by theCompany’s Registrar no later than 10 September 2004.

Amalgamation of accountsShareholders who receive duplicate sets of Company mailingsowing to multiple accounts in their name should write to theRegistrar to have their accounts amalgamated.

Unsolicited mailThe Company is obliged by law to make its share register availableto other organisations who may then use it for a mailing list. If youwish to limit the receipt of unsolicited mail you may do so byregistering with The Mailing Preference Services (MPS). MPS willthen notify the bodies which support its service that you do notwish to receive unsolicited mail. Registration can be made in writingto: The Mailing Preference Service (MPS), Freepost 22, London W1E7EZ or online at www.mpsonline.org.uk

Gifting your shares to charityIf you only have a small number of shares whose value makes ituneconomic to sell them, you may wish to consider donating themto charity through ShareGift, an independent share donationscheme. The relevant share transfer form can be obtained from the Registrar. ShareGift is administered by The Orr MackintoshFoundation, registered charity number 1052686. Furtherinformation may be obtained on 020 7337 0501 or fromwww.ShareGift.org

Registered office and advisors

Registered officeWS Atkins plcWoodcote GroveAshley RoadEpsomSurrey KT18 5BW

Registered number: 1885586

AuditorsPricewaterhouseCoopers LLP1 Embankment PlaceLondon WC2N 6RH

BankersThe Royal Bank of Scotland plc135 BishopsgateLondon EC2M 3UR

Barclays Bank plc50 Pall MallLondon SW1A 1QB

HSBC Bank plc70 Pall MallLondon SW1Y 5EZ

SolicitorsFreshfields Bruckhaus Deringer65 Fleet StreetLondon EC4Y 1HS

StockbrokersCazenove & Co. Ltd20 MoorgateLondon EC2R 6DA

Investment bankersN M Rothschild & Sons LimitedNew CourtSt. Swithin’s LaneLondon EC4P 4DU

88 WS Atkins plc Annual Report 2004

Contents01 Financial summary and Business overview02 Case studies14 Chairman’s statement16 Chief Executive’s review of operations24 Financial review28 Board of Directors30 Directors’ report32 Corporate governance report36 Remuneration report42 Auditors’ report

43 Consolidated profit and loss account44 Consolidated balance sheet45 Consolidated cash flow statement46 Consolidated statement of total

recognised gains and losses46 Reconciliation of movements

in Group shareholders’ funds47 Parent company balance sheet48 Notes to the financial statements83 Five year summary87 Investors’ information

Atkins is a leading provider of professional services. We are the largest engineering consultancy in the UK, the largestmulti-disciplinary consultancy in Europe and the eighth largestdesign team in the world.(1)

Our staff include engineers, architects, surveyors, cost andproject managers, planners, management consultants,geologists and experts in information technology,telecommunications and environmental management.

The majority of our work is focused on the efficient operationof our clients’ capital programmes. We:

Plan all aspects of our clients’ projects, conducting studiescovering technical, logistical, legal, environmental andfinancial considerations.

Design systems, processes, buildings and civil structures. Wedevelop cutting edge solutions and combine them with triedand tested technologies to achieve an optimal result.

Enable complex programmes, delivering one-off projects and managing ongoing processes to reduce timescales, costand disruption, allowing our clients to focus on their core operations.(1) New Civil Engineer – Consultants File 2003; Swedish Federation of Consultant Engineers & Architects – 2003; Engineering News-Record – 2003.

This report has been printed by Royle Corporate Print. Under the framework of ISO 14001, a structured approach is taken to measure, improve and audit their environmental status on an ongoing basis.

The material used in this Report is Revive Silk, manufactured by a paper mill with ISO 14001 accreditation. The material is fully recyclable and biodegradable and meets the National Association of Paper Merchants (NAPM) recycling standards.

Revive Silk is made from a minimum of 75% post-consumer waste. The remaining 25% being mill broke virgin fibres. The virgin fibre is totally chlorine free.

Designed by College Design.

Fully recyclable andbiodegradable

NAPM approvedrecycled product

Wood fibre fromsustainable forests

Totally Chlorine Free

ISO 14001Produced at a mill that holds ISO 14001 certification

WS Atkins plcWoodcote GroveAshley RoadEpsomSurrey KT18 5BWEngland

Telephone +44 (0)1372 726140Fax +44 (0)1372 740055

[email protected]

WS Atkins plcAnnual Report 2004

Annual Report 2004