annual 03

WS Atkins plcAnnual Report 2003

Atkins is a leading provider of consultancy andsupport services.

Our 15,000 highly-skilled staff support complex,technology-based projects across a wide rangeof professional disciplines, from design andengineering to project and asset management.

Our major clients are household names. Our reputation for consistently high standards of delivery and our market-leading expertiseprovide a sound foundation from which to deliver value.

Contents01 Financial summary02 Segmental overview04 Chairman’s statement06 Operating review12 Financial review 16 Board of Directors 18 Report of the Directors20 Corporate governance report23 Corporate social responsibility report25 Remuneration report33 Auditors’ report

34 Consolidated profit and loss account35 Consolidated balance sheet36 Consolidated cash flow statement37 Consolidated statement of total

recognised gains and losses37 Reconciliation of movements

in shareholders’ funds38 Parent company balance sheet39 Notes to the financial statements72 Five year summary76 Investors’ information

01

Financial summary

2003 Results This has been a challenging year for Atkins. Last year’s introduction of our new financeand HR systems caused significant disruption to the business, with an adverse impact on the level of both overheads and net debt during the first half of the year. Howeverunderlying operational performance remained robust and we continued to retain andwin work from our key customers throughout the period.

During the second half of the year the problems with our systems were addressed and a cost reduction programme was implemented to manage overheads. The Group was re-financed and rigorous debt management processes implemented. The basis forimproved financial performance is now in place.

ProspectsThe prospects for the coming year are good. Our forward order book is strong and theconclusion in April 2003 of the Metronet consortium’s contracts to manage the majorproportion of the London Underground has initiated a significant volume of new work.

2003 2002£m £m

Turnover 935.3 806.3

Adjusted profit from operations(1) 18.7 38.1

PFI/PPP bid costs(2) (13.1) (8.9)

Exceptional items before tax(3) (64.5) (6.1)

(Loss)/profit before tax (61.6) 20.9

Net debt(4) (71.9) (57.2)

Dividend per share 3.0p 11.3p

(1) Before Metronet bid costs, amortisation of pension surplus and goodwill, exceptional items andEmployee Benefit Trusts. 2002 figures have been adjusted to be comparable.

(2) Includes £8.4m (2002: £3.8m) Metronet bid costs.(3) Includes cost reduction programme and other reorganisation and restructuring charges, impairment

of assets and write down in carrying value of own shares held in Employee Benefit Trusts.(4) Net debt excludes cash held by the Employee Benefit Trusts and cash held on behalf of sub-contractors.

WS Atkins plc Annual Report 2003Financial summary

More information on all the case studies in this report may be accessed at:

www.atkinsglobal.com/annualreport/casestudies

02 WS Atkins plc Annual Report 2003Segmental overview

Atkins is one of the foremost providers ofconsultancy and support services to the UKtransport sector. Our Highways &Transportation (H&T) and Rail businessesoffer an unrivalled breadth of servicescovering all aspects of surface transport,from initial planning and design tonetwork management and maintenance.

Atkins is the UK market leader in highwayservices to the Highways Agency and alsosupports many local authorities. Our servicesinclude highway management and design,transport planning, integrated highwayservices and transport systems consultancy.

Atkins is also the leading supplier ofengineering design services to the UK railmarket. As part of the Metronetconsortium, Atkins is embarking on a 30-year contract to modernise andmaintain over two thirds of the LondonUnderground.

Segmentaloverview

Design and Government Services providesmulti-discipline design and engineering,business technology, education and assetmanagement services.

Although predominantly public-sectorbased, the division applies its expertise toproviding integrated solutions to a widerange of private-sector organisations. Inaddition, our Investments arm providesfinancial and technical support to theGroup’s participation in PPP and PFI projects.

Richard DeaconHighways & Transportation

Tony FletcherRail

Joint VenturesOur Investments business managesinvestments in PPP/PFI Joint Ventures. Inthe UK our share of turnover from thesewas £24.5m in 2002/3. This figure is notincluded in the segmental analysis above.

Transport Design andGovernment Services

Turnover £195.9mContribution £32.5m

Design, Environment and Engineering (DE2)Business ServicesAsset ManagementInvestments

Percentage of Group turnover

20.9%


Highways & TransportationRail


33.4%

Norman SchunterDesign, Environment & Engineering

Michael FooteBusiness Services

David ClementsInvestments & Government Services

Business streamManaging Directors

03WS Atkins plc Annual Report 2003Segmental overview

Industry provides consultancy and designservices to the aviation and defence,nuclear, power, process, telecoms andwater industries.

The services we provide include technical,engineering and planning consultancy,design and construction management,programme and project management andregulatory advice.

Our clients include blue chip private sectororganisations, UK nuclear licence holders,oil & gas and pharmaceutical companies,telecommunication operators, eight of theten UK water companies, the Ministry ofDefence and the Environment Agency.

Commercial Services provides cost andproperty management and agency servicesto the owners of commercial and industrial property.

Faithful & Gould (F&G) is one of the UK’sleading quantity surveyors, and has astrong reputation in project management.Public and private sector clients includeNetwork Rail, Royal Bank of Scotland and BP.

Lambert Smith Hampton (LSH) provides a broad range of property managementand agency services and has the widestgeographical spread of any UK basedcommercial property consultancy.

Joint VenturesOur share of revenue from TFMC(Proprietary) Ltd which provides assetmanagement to South Africa Telkom was £44.6m. Our share of revenue fromDG21 LLC which supplies supportservices to the US Navy in Diego Garcia,was £7.8m. These figures are notincluded in the segmental turnover above.

Our North American operations compriseprogramme and cost managementcompanies Faithful & Gould and Hanscomb,and Atkins Americas, a full service architectureand engineering company which also provides design build, environmental andsystems integration services.

Outside the US, the primary overseasoperations are in the Middle East, Europe and China/Hong Kong, where we providedesign and engineering services.

Commercial Services InternationalIndustry


Aviation & Defence SystemsNuclearPowerProcessTelecomsWater


12.4%


Cost management (Faithful & Gould)Property management and agency(Lambert Smith Hampton)


12.7%


North AmericaRest of the World


20.6%

Ivor CattoIndustry

Richard HallFaithful & Gould

Chris BoultonLambert Smith Hampton

Paul WoodNorth America

As indicated in previous statements, our difficulties this year arose principallyfrom the implementation of our new finance and HR systems, which disruptedour business. I am able to report that thekey issues have been addressed and oursystems are now providing us with themanagement information we need to run our operations properly.

We have caught up with our billing andcredit control and in this respect we arenow in a better position than we achievedin previous years.

Action to reduce overheads is continuing,and to date has produced annualised cost savings in excess of £15m to offsetthe significant increase in our cost baseresulting from our new systems. Ourprogramme of corrective action alsodelivered significant improvement in netdebt during the second half of the year,reducing it to £71.9m at the year end from £105.4m at 30 September 2002.

04 WS Atkins plc Annual Report 2003Chairman’s statement

Although the past year has been a difficult one for Atkins, I am pleased with the considerable progress we have made in the second half of the year. Our core operating businesses are sound and with our focus on cost reduction, improvingmargins and cash collection we are well on the way towards re-establishing the Group’s performance. During the second halfof the year we have lowered our net debt level, exceeded ouradjusted profit target and concluded in April 2003 the Metronetconsortium’s 30-year contracts with London Underground.

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1 Michael JeffriesChairman.

2 Somerset County Councilrenewed its highwaysengineering servicespartnership with AtkinsHighways & Transportationwith the award of two newfive year contracts.

Chairman’s statement

Atkins’ strength is in the skill andprofessionalism of its staff. Their dedicationhas ensured that the enduring impact ofthe last year’s problems on our clients hasbeen minimal. Our order book remainsstrong and we continue to win new andrepeat business from a diverse range of clients.

We have made substantial progress duringthe second half of the financial year andour focus for the immediate future willremain cash collection and marginimprovement through cost reduction. We have set new margin targets for theGroup’s businesses and are undertakingregular reviews to monitor delivery.

As a result, I believe the Group is firmlyback on track to deliver improvedperformance in the new financial year and on a sustained basis thereafter. It is the Group’s objective to work towards a return to historic operating margins inthe medium-term.

05

ResultsTrading in our principal operations remainedrobust during the period, although ouroverall results are disappointing, havingbeen impacted by the introduction of ournew systems and exceptional restructuringand impairment charges. Turnover andcontribution increased in our core Rail,Highways & Transportation and Designbusinesses, however difficult conditions in the US market continued.

Following a long period of consistentgrowth, adjusted profit before tax for the year of £18.7m is down from £38.1min 2002. Taking account of Metronet bidcosts and one-off, non-operational charges,losses before tax of £61.6m represent a fall of £82.5m compared to 2002.

DividendThe Board is confident in the future of the business and a final dividend of 3.0pper share is recommended to be paid on 1 October 2003 to shareholders on the register on 8 August 2003.

Our peopleOn behalf of the Board, I would like tothank all our staff for their exceptionalefforts over the last year. Whether workingto maintain client services in the face ofsignificant internal disruption or copingwith the issues of restructuring against a background of uncertainty andunfavourable media reports, this has beena difficult year. I am aware of the longhours which have been worked and thehuge effort put in to maintain quality of service to our clients.

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3 Atkins has participated in the development of a new technologywhich uses microwaves and UV light to disinfect water without the need for chemicals.

4 Atkins led a study for the StrategicRail Authority into the potentialfor a new High Speed Rail linebetween the North and South of the UK.

WS Atkins plc Annual Report 2003Chairman’s statement

Board of DirectorsI am pleased to report that Keith Clarkehas accepted the role of Chief Executiveand will join the Board in October fromSkanska AB where he is currently ExecutiveVice President.

Stephen Billingham joined the Board asGroup Finance Director on 1 October 2002.Stephen has made a significant contributionto the Group’s recovery programme duringhis first six months on the Board, and asFinance Director of Metronet, helped tosteer the consortium to financial close. Heresigned as Finance Director of Metroneton 4 April 2003.

Christopher Kemball became a Non-Executive Director on 14 May 2002. Roger Umney retired as a Non-ExecutiveDirector on 1 October 2002. Paul Marshresigned as a Non-Executive Director on 10 April 2003 due to other businesscommitments. Frances Heaton will beretiring as a Non-Executive Directorfollowing the forthcoming Annual GeneralMeeting. I would like to thank her for her long service to the Board.

Robin Southwell, the former ChiefExecutive, left the Board on 30 September2002 and Ric Piper, the former GroupFinance Director, left the Board on 1 October 2002.

Our prospectsOur order book remains strong and wecontinue to win new business from ourkey customers. At the start of the newfinancial year the Metronet consortium, in which the Group is a 20% shareholder,signed its 30 year Public Private Partnership(PPP) contracts with London Underground.Metronet will undertake a programme of repair and refurbishment that will deliver substantial improvements to theunderground infrastructure and significantreturns for the Group.

Results in the early part of the new financialyear are in line with our expectations. TheBoard is confident that a stronger focus on operations will form the basis for a sustained recovery in our performance.

Michael JeffriesChairman 26 June 2003

06 WS Atkins plc Annual Report 2003Operating review

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1 Atkins is designing and developing the journey planning software for Transport Direct, the UK government’s comprehensive journey planning service.

2 Network Rail draws upon Faithful & Gould’s quantity surveying and commercial management skills such as here at Newark Dyke through a five year framework contract.

TransportTurnover in our Transport division rose by31.2% to £312.0m (2002: £237.8m),excluding Joint Ventures.

Highways & Transportation (H&T)H&T experienced strong growth in largeintegrated service contracts, including a£172m contract renewal with SomersetCounty Council over five years. Theintelligent transport systems businesssecured a two year extension to its travelinformation and traffic control contract in South Wales, won a key role in theTransport Direct national journey planningproject, and is participating in a major roaduser charging trial in Leeds. The two newmanagement projects for the HighwaysAgency (Areas 10 and 11) operated wellduring the year, and the Connect JointVenture was awarded the concession todesign, build, finance and operate the£130m M77 Glasgow Southern Orbital inMay 2003.

Transport Planning undertook majorstudies for the Department for Transport,the Strategic Rail Authority, the Commissionfor Integrated Transport, Transport forLondon, the Highways Agency and theEuropean Commission.

ProspectsLooking ahead, market trends includeincreasing use of technology to improvetransport efficiencies and an increasingemphasis on integrated solutions – bothareas in which the Group excels. We alsoexpect to gain additional work fromregional planning bodies in the UK. H&T is also well-placed to respond effectively togreater use of private finance in highways

Atkins is well establishedin the top priorityupgrade schemesidentified by theStrategic Rail Authority.

Operating review

contracts with the Highways Agency andlocal authorities. We already support manysuch opportunities in-house but will developstrategic relations with other serviceproviders and suppliers where appropriate.

RailAtkins Rail benefited from strong demandfor safety-related upgrades, the extensionof existing fleet lifecycles and independentcertification of new vehicle classes. The Rail Civils business successfully re-bid its structural examination contracts inScotland and Southern England. Atkins is the only company to hold more thanone of these new 10-year contracts.

Atkins continues to play a significant role in supporting major investment programmes such as the West CoastRoute Modernisation.

ProspectsAtkins Rail is well established in the toppriority upgrade schemes identified by the Strategic Rail Authority and we expectto see increasing work from our multi-functional framework contract withNetwork Rail. Our biggest single projectwill be the work on the LondonUnderground, which commenced in April 2003 when Metronet was awarded a 30 year modernisation and maintenancecontract (see case study opposite).

In December 2002, the UK governmentunveiled a £5.5bn package of national and local transport measures to acceleratethe delivery of the 10-year transport plan.Atkins is well-placed to take advantage of opportunities which may arise as thesemeasures are introduced.

Working for a better TubeResponsibility for managing theinfrastructure of the LondonUnderground system has now passedto two private sector consortia, one of which is Metronet in which theGroup is a 20% shareholder.

07WS Atkins plc Annual Report 2003Operating review

Metronet’s 30 year partnership withLondon Underground covers the SSL(Metropolitan, District, Circle,Hammersmith & City and East London)and BCV (Bakerloo, Central, Victoriaand Waterloo & City) lines. Togetherthese lines make up over two thirds ofthe underground network.

Atkins brings a diverse range of skillsto the project. We will design premisesas well as new passenger information,CCTV and public address systems, helppoints and destination indicators.Atkins will also manage the structuralinspections, assessments and designwork on some 3,800 bridges andstructures, 80 miles of tunnels andnearly 100 miles of earth structures.

Design & Government Services Market conditions were good in the year,with our design and engineering teamsbenefiting from growth in the UKconstruction market and our consultantsresponding to strong public sector demandfor technology consulting and projectmanagement. Turnover, at £195.9m, was up 10.1% (2002: £177.9m), excludingJoint Ventures.

It was a particularly good year for Design,Environment and Engineering (DE2), which benefited from growth in the UKconstruction market, winning a designcommission for the Colchester Garrison PFI project and securing designpartnerships with the Department for theEnvironment, Food and Rural Affairs, theDepartment for Work and Pensions andDerbyshire County Council. We also won a new commission to design the Wiltshireand Swindon Archive Centre, one of thelargest heritage centres in the country.

Recent legislation has placed theenvironment high on the agenda for bothpublic and private organisations, and we capitalised on these opportunitiesduring the year. We are market leaders in geotechnical and environmentalconsultancy for the infrastructureengineering market, and our planning and landscape business is one of thelargest in the UK.

In the education sector we provided anextensive range of services to schools inMerton, Cornwall, Oxford, Essex andSomerset. We foresee continued demandfor design and facilities managementservices in this sector, however there has been a discernible shift away fromlarge-scale intervention outsourcing andwe are withdrawing from the provision of these services to the London Borough of Southwark.


21

1 Atkins is working with theEnvironment Agency tomitigate the increasingproblem of flooding byproducing models to predictwhere floods will occur.

2 Tony Fletcher, ManagingDirector of Atkins Rail (left)and Mike Willmore, Director of Trans4m, discussing themodernisation of the London Underground.

Our consultantsresponded to strongpublic-sector demandfor technologyconsulting and projectmanagement.

In Asset Management, the focus was on restructuring for the future, with someunattractive projects being terminated or renegotiated. The business is nowstreamed into its four principal marketsectors of Government & Education,Defence, Health, and Corporate & Retail,with shared support services. Our nationalhelpdesk handles in excess of five millioncalls each year and was categorised as best in class in a recent BT survey. We arealso developing a series of supply chainpartnerships in order to respond to the growing demand for total assetmanagement solutions.

Financial performance in Business Servicesimproved due to a number of long-termcontracts with local and centralgovernment departments. These includedprogramme and project managementservices at GCHQ, the Foreign andCommonwealth Office, the HighwaysAgency, the Office of National Statisticsand the Environment Agency. We alsocontinued to operate long-term contracts toprovide business technology managementand support to the Food StandardsAgency, Department for Education andSkills and Swindon Borough Council.

Atkins Investments (our PPP/PFI unit) had a busy year, reaching financial close on the London Borough of Merton SchoolsPFI project. We were also made provisionalpreferred bidder for the Royal School ofMilitary Engineering, as well as providingsupport to Metronet for the LondonUnderground PPP and the M77 roadproject in Scotland. The ColchesterGarrison PFI project made good progress,with planning permission finally beingachieved in July 2003.


43

3 Atkins has embarked on detaileddesigns for Colchester Garrison.

4 Airbus has chosen Atkins tosupport the development of itsnew A380 airliner and, right,A400M military transport aircraft.

ProspectsLooking ahead, our appointment aspreferred bidder for the ColchesterGarrison PFI project demonstrates the scopeof our capabilities. Atkins’ involvement in the project includes multi-disciplineplanning design, asset management, costconsultancy, and other specialist services.Against this background, medium termplans for public sector investment areexpected to provide significant opportunitiesfor Design and Government Services inthe coming year.

UK Joint VenturesOperating profit was £10.5m (2002:£10.6m). Profit before tax was £2.9m(2002: £3.5m).

The majority of the Group’s UK JointVentures performed as expected duringthe year. Half of the Group’s JointVenture operating profit was fromConnect Roads Limited in which Atkinshas a 32.1% stake. A limited refinancingof the Connect projects was completedin November 2002, enabling the Joint Venture company to distribute a dividend to its shareholders.

Joint Ventures in the UK health andeducation sectors continued to performin line with expectations.

Following a review of prospects in theprison sector, we sold our 5.3% stakein Bridgend Custodial Services. We willcontinue to review our PFI portfolio to ensure we make best use of theGroup’s capital.

Industry Turnover in Industry rose by 24.2% to£116.4m (2002: £93.7m).

Aviation and Defence Systems (A&DS)A&DS delivered profitable growth in 2003.Aerospace prime contractors are facedwith a significant level of design activity for major new programmes such as A380,A400M and Joint Strike Fighter (JSF). We are well positioned as Airbus’ selectedengineering solutions partner for bothA400M and A380 projects and are well-placed to build on our involvement in these and the JSF project.

NuclearThe year was challenging for Nuclear.There was some uncertainty in the marketas BNFL and UKAEA developed theirstrategies and this led to delays in contractawards. However, our forward order bookis healthy, and performance in 2004 isexpected to benefit from measures takento improve the efficiency of the business.

PowerIt was a profitable year for Power.Regulatory requirements and governmenttargets are driving growth in our keymarkets of energy solutions andrenewable energy. We have forged closeworking relationships with key clients,particularly on our framework and alliancecontracts which should provide theplatform for success in 2004.

ProcessMuch of our work for the oil and gassector involves ensuring the safety andintegrity of existing assets. As a result wewere able to maintain our workloadduring 2003 despite reduced investment inthe UK market. Looking ahead, we will seek to capitalise on our expertise in nicheoil and gas markets.

TelecomsThe telecoms market remained weak, withlittle sign of immediate improvement.Despite this backdrop, performance on our key contracts improved during the yearand we believe that our cost base willenable us to continue to deliver acceptablereturns in this sector.

WaterWater is one of the UK’s leading waterconsultancies, having major frameworkcontracts with the Environment Agency (EA) and many of the privatised watercompanies. Our business performed wellduring the year, winning significant workfrom the EA in the area of flood preventionand prediction.

Commercial ServicesTurnover in Commercial Services fell 0.9%to £118.4m (2002: £119.5m).

Cost management – Faithful & Gould (F&G)During 2003 the public sector marketremained particularly buoyant. Investment in the renewal, repair and improvement ofthe national rail network was maintained,and several regions continued to invest inlight rail or similar systems. Regulatoryobligations imposed upon utility providers,particularly the water and power sectors,continued to drive investment. The privateproperty sector showed signs of decline,especially in the South East.

F&G consolidated its lead in the costmanagement market by focusing on serviceimprovements, offering a broader range ofskills and applying the latest asset planningand maintenance management tools.

During the year F&G won a Network Railcontract for cost management support, anew four year commission to provide costmanagement services for Scottish Waterand a contract to provide outsourcedtechnical services to Derby City Council.

Managing Britain’shighwaysDuring the year our Highways &Transportation business led byManaging Director Richard Deacon(above right, seen here with TechnicalDirector David Jenkins) began work ontwo new management and operationalcontracts for the Highways Agency(Area 10 and 11).


These latest commissions reflect the trend towards large, long-term,multi-discipline contracts.

The £190m Highways AgencyManaging Agent Contract for Area 11in the Midlands was secured throughOptima Infrastructure Management (Atkins working in partnership withAccord-Jarvis).

We are also creating strategic alliancesto bid for multi-activity contracts forLocal Authorities and private financehighway maintenance schemes.

Connect, our Joint Venture withBalfour Beatty, was awarded thecontract to design, build, finance andoperate the £130m M77 and GlasgowSouthern Orbital motorway in Scotland.


1 Atkins is helping to build anew systems developmentcentre for the Royal Navy. Thefacility will develop combatsystems for the T45 destroyer.

2 Atkins Power is managingenergy trading for GrowersCHP, which provides combinedheat and power to thehorticulture industry.

ProspectsWe expect that the government’scommitment to public sector investmentwill continue to provide significantopportunities. We will be looking to buildupon very strong positions in the transportand utilities sectors, where frameworkarrangements provide future workload.

Property management and agencyservices – Lambert Smith Hampton (LSH)The year was characterised bycontrasting conditions in differentmarket sectors. The retail sectorbenefited from an upturn as a result of a strong consumer sector and growthin the service sector was sustained by demand for distribution andwarehousing space. The investmentmarket continued to be dominated byprivate investors, reflecting low interestrates and high returns compared to the underperforming equity market.Conversely the office and manufacturingsectors suffered from rationalisation,reduced investment and slower rental growth.

Against this background, LSH had a successful year. Of particular notewas the performance of our West Endinvestment business, which successfullynegotiated three multi-million poundproperty transactions on behalf ofPraedia/Cardinal Lysander, Sydney &London and Dawnay Day. Our Industryteam was named Best IndustrialAgency in Property Week’s 2002Property awards. Significant newcontracts won in the year includedprovision of estates and valuationservices to Hertfordshire CountyCouncil (a contract worth £6m overfive years), and management ofHenderson Global Investment’s UKproperty portfolio. Across all sectors,we transacted over 33million sq ft ofspace during the year.

ProspectsLooking ahead, the UK’s economicperformance will depend on the globaleconomic recovery and in particularrecovery in the US. Domestic consumerspending and the housing market havebeen the main driving forces behindthe UK’s economic performance during2003: a significant downturn in eitherof these areas could pose a threat,particularly to the domestic and retailsectors. Over supply of office space islikely to mean that rental growth willnot return to this sector until 2004.

InternationalTurnover in International grew by 8.6% to £192.6m (2002: £177.4m).

Our USA operations experienced mixedfortunes during the year, reflectingchallenging market conditions due touncertainty over the situation in Iraq.

Hanscomb International Corp. (Hanscomb),acquired in June 2002, performed well,winning a major construction managementcontract with Honda. While Faithful & Gould also made progress, AtkinsAmericas Inc., formerly the Benham GroupInc., had to contend with weak demand in its core markets and a generally weakprivate sector economy.

Workload remained unpredictable during the period, with fewer projectscommencing and more intense competitionto win work. A number of projects forwhich we had been commissioned weredelayed or cancelled. In response to thesedifficult conditions, we undertook athorough review of the business to alignboth operational and corporate overheadcosts with business activity and productivity.

ProspectsLooking ahead, our North Americanoperations continue to pursue privatisationprojects. Over half of all federalconstruction contracts are being executedusing a design-build delivery approach,and that percentage is expected to growthe next few years, providing significantopportunities in this sector for theforeseeable future.

International Joint VenturesOperating profit was £3.7m (2002: £3.9m).Profit before tax was £3.8m (2002: £4.1m).

Rest of the worldElsewhere in the world the skills of ourdesigners continued to be in demand. Our design team prepared schemes forprestigious new hotels in Tunisia and SaudiArabia. In Hong Kong, we were awardedtwo major rail contracts to provide designand construction services for extensions to commuter rail lines.

International Joint Ventures continue toperform in line with expectations. TFMC(Proprietary) Ltd which manages SouthAfrica Telekom’s entire property portfolio, is one of the world’s largest outsourcingagreements.

21

12 WS Atkins plc Annual Report 2003Financial review

21

1 Stephen BillinghamGroup Finance Director.

2 Atkins Rail has won a majorconsultancy contract with theDanish National Railway Agency.

Financial review

Since my appointment as Group Finance Director on 1 October 2002, my focus has been on refinancing the Group and improving cash generation and net margin performance.

Results summaryYear to Year to

31 March 2003 31 March 2002£m £m

Turnover 935.3 806.3

Contribution from operating segments(1) 123.8 116.7Overheads (105.0) (80.3)Joint Ventures profit 14.2 14.5Net interest payable (9.6) (7.7)Bid costs (excluding Metronet) (4.7) (5.1)

Adjusted profit before tax(2) 18.7 38.1

Metronet bid costs (8.4) (3.8)Amortisation of pension surplus 3.7 3.4Amortisation of goodwill (11.1) (9.4)Employee Benefit Trusts – (1.3)

Profit on ordinary activities before tax 2.9 27.0

Exceptional items (64.5) (6.1)

(Loss)/profit before tax (61.6) 20.9

Basic (loss)/earnings per share (58.7)p 13.1pAdjusted earnings per share(2) 16.5p 31.4p

(1) Contribution from operating segments is operating profit before allocation of overhead costs, amortisation of pension surplus and goodwill, bid costs, Employee Benefit Trusts (EBTs), Joint Ventures and exceptional items.

(2) Adjusted profit is before Metronet bid costs, amortisation of pension surplus and goodwill, EBTs and exceptional items.

We are focused on cash generation and net marginperformance.

13WS Atkins plc Annual Report 2003Financial review

TurnoverTurnover increased by 16.0%, of which12.2% was organic and 3.8% relatedto Hanscomb International Corp(Hanscomb, acquired in July 2002) andScanrail (acquired in July 2001).

ContributionContribution from operating segmentsincreased by 6.1%, reflecting theunderlying profitability of the Group’s coreoperations. Further analysis of theperformance of our business segments iscontained in the Operating review.

OverheadsOverheads increased by 30.8% during2003. The Group replaced its UKinformation technology infrastructureand finance and HR systems in 2002,and this intensive programme of capitalinvestment gave rise to significantlyincreased depreciation and maintenancecosts. To offset this, the Groupannounced a cost reduction programmein October 2002. As a result, overheadcosts had been reduced by more than£15m per annum on an ongoing basisby the year end. External cost pressures,such as premiums for professionalindemnity insurance, continue to providea challenge and we are constantlyworking to manage our cost base.

Joint VenturesIn accordance with FRS 9, Associatesand Joint Ventures, the Group hasreported £6.7m (2002: £7.6m) as itsshare of the profit before tax of its Joint Ventures, being the Group’s shareof operating profit of £14.2m (2002:£14.5m) less net interest payable£7.5m (2002: £6.9m). Joint ventureperformance will be enhancedsignificantly by Metronet in 2004.

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3 Ivor Catto (middle), Managing Director of Industry with Project Manager Dave Miller on site at Avecia where we aremanaging the building of theirnew manufacturing plant.

4 The Highways Agency asked Atkins to design and manage installation of a new M25 CCTV system.

Net interest payableExcluding Joint Ventures, the rise in netinterest payable from £0.6m to £2.0mreflected the deterioration in the Group’snet debt position during the year.

Net interest payable is expected to risein 2004 reflecting the cost of financingthe Group’s investment in Metronet(see below), partially offset by ongoingreductions in the level of net debt.

Bid costsThe results were after charging £8.4m(2002: £3.8m) on the Metronet bid forthe London Underground. Additionalbid costs of £4.7m (2002: £5.1m) were incurred during the year on otherPFI/PPP projects, including ColchesterGarrison. In compliance with UITF 34Pre-contract costs the Group capitalisesPFI/PPP bid costs from the point atwhich it becomes virtually certain thatsuch costs will be recovered. No costswere capitalised with respect to PFI/PPPbids during the period under review.

It is expected that the level of bid costswill be substantially lower in 2004,following Financial Close on Metronetand as the Colchester Garrison bidnears completion.

Cumulative bid costs and developmentfees of £20m were reimbursed on 4 April 2003 in respect of Metronetand will be amortised over the life ofthe concessions in accordance with theGroup’s accounting policies.

PensionsAmortisation of pension surplus of£3.7m (2002: £3.4m) relates to theAtkins Staff Scheme and the RailwaysScheme and is based on the latest SSAP24 actuarial valuation of each scheme

(1 April 2001 and 31 December 2001respectively). It is the Board’s intentionto request an updated actuarialvaluation of the Group’s definedbenefit pension schemes during thefirst half of the new financial year andthe Group’s accounting estimates withrespect to pensions will be reviewedfollowing this exercise.

Preliminary discussions with theactuaries indicate that, in order tomaintain existing benefits, additionalcontributions in the order of £6m per annum may be required.

AcquisitionsThe acquisition of Hanscomb in June2002 accounted for £5.0m net cashoutflow. Goodwill arising from theacquisition amounted to £20.3m.

Operating profits were after charging£11.1m (2002: £9.4m) of goodwillamortisation relating to Hanscomb and to acquisitions made in prior years.The cost of goodwill amortisation isexpected to fall in 2004 as a result ofthe write down in the carrying value of goodwill discussed below.

Exceptional itemsLoss before tax is after exceptionalitems totalling £64.5m. Of this, £33.3mrelated to impairment of assets, primarilyin North America where the slowdownof the market significantly impacted the results of Atkins Americas Inc.(formerly the Benham Group Inc.). Inaddition, £16.4m was written off thecarrying value of own shares held in EBTs and £14.8m related to the cost reduction programme and otherreorganisation and financialrestructuring charges.

14 WS Atkins plc Annual Report 2003Financial review

TaxationThe Group’s effective tax rate in 2003was 18.5% (2002: 25.5%) of Adjustedprofit. The variation between this rate and the UK corporation tax rate of 30.0% is explained in Note 8 to the accounts.

The reduction in effective tax rate wasprimarily due to the release of provisionfor deferred tax in respect of tax benefitson amortisation of shares in the EBTs.

We expect the Group’s effective taxrate to revert to normal levels in 2004as the Group returns to profitability.

Dividends The Directors propose a final dividend of 3.0p per share.

EPS and adjusted EPS figures Basic EPS was a loss of 58.7p (2002: profitof 13.1p), reflecting the impact ofexceptional items on the year’s result.

Adjusted EPS was a profit of 16.5p (2002:31.4p) based on Adjusted profit before taxof £18.7m (2002: 38.1m) and that part ofthe Group’s tax charge attributable to this profit.

Cash flowIn spite of reduced operating profit, netcash inflow from operating activitiesincreased by £6.3m in the year due toimproved working capital management.Dividends increased by £5.7m primarilydue to a dividend received from theConnect Joint Venture on completion of itsrefinancing. Capital expenditure was lowerby £34.5m reflecting completion ofinvestment in information technology.

21

1 Norman SchunterManaging Director of Design, Environment and Engineering reviews our work at London City Airport.

2 Network Rail has awarded our Rail business two 10-year contracts to examine structuresin the Southern Region and in Scotland.

Metronet presents asignificant opportunityto the Group.

Going forward net cash flow fromoperating activities is expected to continueto rise as the benefits of new margintargets are realised. Tax payments willincrease as the Group returns toprofitability, however capital expenditure is expected to be lower than in 2003. The Group will also benefit in 2004 from reimbursement of bid costs anddevelopment fees relating to Metronet (see below).

Activities which are expected toenhance future performanceAtkins is a 20% shareholder in theMetronet consortium (Metronet) which,after nearly 4 years of negotiation,consultation and planning, achievedFinancial Close on its 30-year Public PrivatePartnership (PPP) with LondonUnderground on 4 April 2003.

The Group expects that operating profitsfrom supply chain work and fees relatingto Metronet will be around £7m in the first year, rising to £13m per annum overthe rest of the initial seven year period. In addition the Group will account for itsshare of the profit before tax of Metronetwhich is expected to be around £10m in the first year and £12m per annumthereafter.

The Group will invest £70m in Metronet by way of equity and shareholdersubordinated debt over the first six years of the concession, £2m of which wasinvested at Financial Close. The equitycontributions and the post tax supply chainprofits taken together will be broadly cashneutral over the first seven years, afterwhich Metronet is expected to returnsignificant dividends to Atkins.

15WS Atkins plc Annual Report 2003Financial review

TreasuryThe role of Group Treasury is to manageand monitor the Group’s external fundingrequirements and financial risks in supportof the Group’s corporate objectives. TheBoard reviews and agrees policies andauthority levels for all areas of treasuryactivities. Group Treasury is not a profitcentre and therefore does not undertakespeculative trading.

The Group funds its ongoing activitiesthrough cash generated from itsoperations and bank borrowings. TheGroup’s cash flow is analysed in detail inNote 31 to the accounts. As a result of theproblems arising from the implementationof our new finance and HR systems, theGroup’s net debt position deteriorated to£105.4m at 30 September 2002 (31March 2002: £57.2m). The Group madesubstantial progress on improving its debtmanagement in the second half of theyear and at 31 March 2003, net debt had been reduced to £71.9m.

On 27 February 2003, the Groupannounced that it had signed newbanking facilities with its principal lendingbanks. These facilities include cash facilitiesand bonding lines, as well as a £68m Letterof Credit facility in relation to the Group’songoing equity obligations under theMetronet transaction.

The fees for the Letters of Credit includedan agreement to issue warrants in respectof 4,715,200 Atkins shares (representingapproximately 4.73% of Atkins’ currentissued share capital) on financial close ofMetronet. 50% of these warrants areexercisable at any time from 4 July 2003.

A further 25% of them are exercisable atany time from 4 October 2003, and theremaining warrants are exercisable at anytime from 4 January 2004. An amount of0.5p (the nominal value of Atkins’ shares) is payable in respect of each Atkins’ shareissued on the exercise of the warrants.

The Group also has the Sterling equivalentof £3.5m banking facilities available tonon-UK parts of the Group.

Private Finance Initiative (PFI) andPublic Private Partnership (PPP)The Group’s PFI and PPP projects involvethe Group in arranging finance as part ofthe overall project service. Individualprojects are undertaken in Special PurposeCompanies (SPCs) in Joint Ventures withother parties. These SPCs contract withend users for the provision of servicedfacilities and also arrange funding,construction, facilities managementservices and, where required, operationalsupport for the project.

Except for equity commitments, thefunding of these SPCs is arranged withoutrecourse to the rest of the Group. TheGroup’s share of the gross assets andliabilities of these SPCs is reflectedseparately in the Group accounts inaccordance with the provisions of FRS 9.

Interest rate and liquidity riskThe Group funds itself using floating rateborrowings. The Board considers that thenew banking facilities entered into on 27 February 2003 include sufficientfunding to allow for seasonal variations inworking capital. At 31 March 2003, theamount undrawn under the Group’s creditlines was £51.3m.

Foreign currency riskThrough its acquisition of the BenhamGroup Inc. (now Atkins Americas Inc.) in2000 and Hanscomb in 2002, the Grouphas significant US Dollar denominatedassets. To mitigate the effect of currencyexposures arising from its net investment in the US the Group has financed part ofits investment by borrowing in US Dollars.The borrowing is currently at a floating rate of interest.

The Group also has transactional currencyexposures. These exposures arise fromsales or purchases in currencies other than Sterling. It is the Group’s policy tohedge the risk arising from contractsdenominated in currencies other thanSterling. At 31 March 2003 the Group had outstanding forward foreign exchangecontracts amounting to the equivalent of £1.2m.

Stephen BillinghamGroup Finance Director

43

3 Hanscomb is managing construction of a major extension to Honda’s car plant in Lincoln, Alabama.

4 David Clements, ManagingDirector of Investments andGovernment Services (left) andGraham Brammer, Barclay’sGroup Director PropertyServices, interrogate thePerformance Dashboard, a toolthat provides an at a glanceindication of service levels onasset management contracts.

Michael JeffriesChairman, age 58Michael Jeffries, Chartered Architect, was appointed a Director in 1992, ChiefExecutive in 1995, and Chairman in April2001. He joined the Group in 1975 and in 1979 was appointed a Director of WS Atkins Group Consultants, a formerGroup Company. He was appointed a Non-Executive Director of De La Rue plc in April 2000 and Chairman of WembleyNational Stadium Ltd in April 2002.Michael is a member of the NominationCommittee.

Frances HeatonDeputy Chairman and Senior Non-Executive Director, age 58Frances Heaton was appointed a Non-Executive Director in 1990 and DeputyChairman in 1996. She is currently a Non-Executive Director of Legal & GeneralGroup plc and awg plc and a member ofthe Committee on Standards in Public Life.She was formerly an Executive Director of Lazard Brothers & Co. Limited, a Non-Executive Director of the Bank of Englandand Commercial Union plc and Director-General of the Panel on Take-Overs and Mergers. Frances is Chairman of theAudit Committee, and a member of theRemuneration Committee and theNomination Committee.

James MorleyNon-Executive Director, age 54James Morley was appointed a Non-Executive Director in January 2001. He is a Chartered Accountant. He is currentlyGroup Finance Director of Cox InsuranceHoldings plc and a Non-Executive Directorof Bankers Investment Trust. He haspreviously been Finance Director at ArjoWiggins Appleton plc, Guardian RoyalExchange plc and Avis Europe plc. James is a member of the Audit Committee, the Remuneration Committee and theNomination Committee.

Stephen BillinghamGroup Finance Director, age 45Stephen Billingham was appointed to theBoard in October 2002. He joined Atkins in the Autumn of 2000 as Group Financial Controller. For the year prior to joining the Board he was on full timesecondment to the Metronet LUL PPPconsortium as Finance Director. Stephenspent 11 years with the engineering groupBICC plc (now Balfour Beatty plc), where hewas Group Treasurer from 1993 to 2000.He has previously held finance positions inSevern Trent plc, the Burmah Oil plc andBritish Telecommunications plc.

Christopher KemballNon-Executive Director, age 56Christopher Kemball was appointed a Non-Executive Director in May 2002. Most of his career has been in investmentbanking in Europe, Emerging Markets and the USA. He is currently a ViceChairman of Hawkpoint Partners Limited,the independent corporate advisory firm.He is also a Non-Executive Director of TheDavis Service Group plc and Control RisksGroup Limited. Christopher is a member of the Nomination Committee.

Struan RobertsonNon-Executive Director, age 53Struan Robertson was appointed a Non-Executive Director in August 2000. Struanis a mechanical engineer with an MBA. He retired from BP in July 2000 after a distinguished international career wherehe held posts as Chairman of BP AsiaPacific, Chief Executive Oil TradingInternational and Senior Vice PresidentTechnology and Marketing. Followingretirement, Struan was appointed as GroupChief Executive of the Wates Group. He isa past Deputy Chairman of the InternationalPetroleum Exchange. Struan is Chairmanof the Remuneration Committee, and a member of the Audit Committee andthe Nomination Committee.

16 WS Atkins plc Annual Report 2003Board of Directors

Board of Directors

17WS Atkins plc Annual Report 2003Board of Directors

21

43

65

1 Michael Jeffries2 Stephen Billingham3 Frances Heaton4 Christopher Kemball5 James Morley6 Struan Robertson

The Directors present their report togetherwith the audited financial statements ofthe Group and the Company for the yearended 31 March 2003. These will be laidbefore the shareholders at the AnnualGeneral Meeting to be held on 16 September 2003.

Principal activities and business reviewWS Atkins plc is a leading provider oftechnology-based consultancy and supportservices with offices in the UnitedKingdom, Europe, the Middle East, AsiaPacific and the USA. As at 31 March 2003it employed 15,392 (2002: 15,159)permanent staff worldwide. It reportsthrough five segments: Transport, Designand Government Services, Industry,Commercial Services and International(including North America).

The Chairman’s statement (pages 4 and 5),and Operating review (pages 6 to 11),Financial review (pages 12 to 15) and theCorporate and social responsibility report(pages 23 and 24) report on Atkins’performance during the past year andprospects for the future. The reviews areincluded in this report by reference,together with the list of the principalsubsidiary undertakings and the countriesin which they operate (Note 33).

The loss for the year after tax of £54.3m isshown in the consolidated profit and lossaccount on page 34. A final dividend of 3 pence (2002: 7.56 pence) per ordinaryshare is proposed making a total dividendfor the year of 3 pence (2002: 11.34 pence)if approved. The final dividend will be payable on 1 October 2003 toshareholders on the register at the close of business on 8 August 2003.

Acquisitions On 24 June 2002 the Company acquiredHanscomb International Corp, a projectmanagement consultancy business with370 staff. The consideration of £21.7mwas met from existing borrowing facilitiesand the issue of 3,039,617 new shares.

Report of the Directors

18 WS Atkins plc Annual Report 2003Report of the Directors

Share capitalDetails of the Company’s authorised andissued share capital can be found in Note 23of the financial statements.

Directors The Directors of the Company at the dateof this report are shown on page 16. On 14 May 2002 Christopher Kemball and Paul Marsh were appointed as Non-Executive Directors. Paul Marsh subsequentlyresigned on 10 April 2003 due to asignificant increase in his other businesscommitments which meant he was unableto devote sufficient time to the affairs ofthe Company. On 30 September 2002Robin Southwell resigned as a Director. On 1 October 2002 Ric Piper resigned as aDirector and Roger Umney retired andresigned as a Non-Executive Director.

At every Annual General Meeting (AGM)one third of the Directors must retire byrotation and may be reappointed. At theforthcoming AGM James Morley will retire in accordance with the Articles ofAssociation and being eligible offer himselffor re-election. Stephen Billingham, havingbeen appointed to the Board since the lastAGM, will retire and being eligible, offerhimself for re-election. Frances Heaton, the Deputy Chairman and Senior Non-Executive Director, will also retire and will not be seeking re-election.

Details of Directors of the Company, theirremuneration, shareholdings, options and long term incentive entitlements are given in the Remuneration report on pages 25 to 32.

Subsequent eventsOn 4 April 2003, the Metronet consortiumin which the Group is a 20% shareholder,signed 30 year contracts with LondonUnderground. Further information onthese contracts is given on pages 7 and 14.

Substantial shareholdings As at 26 June 2003 the Company hadbeen notified in accordance with Sections198 to 208 of the Companies Act 1985 ofthe following interests in ordinary shares:

No. of ordinary % of

share issuedName shares capital

The Atkins (No. 4)Employees’ Benefit Trust(1) 4,922,371 4.93%

Aviva plc(1) 3,602,791 3.61%

BH Caporn andAC Vause(1) 3,797,588 3.80%

FMR Corp and Fidelity International Limited(2) 10,470,658 10.49%

Legal and General Group plc(3) 3,079,802 3.08%

(1) Not a beneficial interest.(2) Interest arises in the context of passive

investment activities only by the variousinvestment accounts managed on a discretionary basis.

(3) Beneficial interest.

Save as referred to above, the Directors arenot aware of any person as at 26 June2003 who was interested in 3.0% or more of the issued share capital of theCompany or could directly or indirectly,jointly or severally, exercise control over the Company.

Corporate governanceA report on corporate governance is on pages 20 to 22.

Corporate social responsibilityA report on corporate social responsibility is on pages 23 to 24.

Business conduct policyThe Board is responsible for the Group’sBusiness Conduct Policy. The Groupbelieves that integrity is a fundamentalprerequisite for successful businessrelationships, both internally andexternally. Reputation, trust andconfidence are essential elementswhich we seek to protect and enhanceto the benefit of all with whom wehave a relationship. The Group seeks to understand and meet its customers’needs, whilst seeking continuousimprovement. Across the Group thereare procedures in place which seek tounderpin this approach. By so doingthe Group aims to meet the needs ofcustomers, shareholders and staff.

Payments to suppliersThe Group agrees terms and conditionsfor its business transactions withsuppliers and endeavours to makepayments to these terms, subject to theterms and conditions being met by thesuppliers. Although systems issuesduring the early part of the financialyear significantly disrupted the normalpayment cycle, as at 31 March 2003,the number of days of annual purchasesin the Group represented by year endcreditors had returned to a normal levelof 29 days (2002: 49).

Charitable and politicalcontributions Amounts given by the Group for charitablepurposes were £115,000 (2002: £84,900).It is the Group’s policy not to make politicaldonations either in the UK or overseas.

The Group has no intention of making anypolitical donations or incurring suchexpenditure in the future. However, thePolitical Parties, Elections and ReferendumAct (the PPER Act) came into effect during 2001 and defines “EU PoliticalOrganisation” widely. There is someuncertainty over which bodies are coveredby the definition and what will be classifiedas a “Donation”. The Board will thereforeseek authority at the forthcoming AGM tomake political expenditure up to £100,000in order to prevent inadvertent breach of the PPER Act.

European Monetary UnionThe impact of the introduction of theEuro on the Group has been minimalreflecting the fact that approximately£21.0m (2.2%) of Atkins’ turnover in2003 was generated in the 12 countriesand that the Group’s local systems havebeen appropriately amended. It is notpossible to predict whether the UK willadopt the Euro in the future, at whatexchange rate it might be adopted orwhether any impact on Atkins wouldbe significant. The Group neitheranticipates changing its reportingcurrency nor denominating its sharecapital in Euros, unless the UK decidesto join the European Monetary Union.

Tax statusThe close company provisions of theIncome and Corporation Taxes Act 1988do not apply to the Company.

Annual General MeetingThe Annual General Meeting will be heldon 16 September 2003 at 4.30pm.

Directors’ responsibilitiesThe Directors are required by UK companylaw to prepare for each accounting periodfinancial statements which give a true andfair view of the state of affairs of theGroup and the Company as at the end ofthe accounting period and of the profitand loss of the Group for that period. Inpreparing the financial statements theDirectors are required to select and applyconsistently suitable accounting policiesframed by reference to reasonable andprudent judgements and estimates.Applicable accounting standards also haveto be followed and a statement made tothat effect in the financial statements,subject to any material departure beingdisclosed and explained in the notes to thefinancial statements. The Directors arerequired to prepare the financialstatements on a going concern basisunless it is inappropriate to presume thatthe Group will continue in business. TheDirectors are responsible for ensuringproper accounting records are kept whichdisclose with reasonable accuracy at anytime the financial position of the Companyand the Group and to enable them toensure that the financial statementscomply with the Companies Act 1985.

They are also responsible for takingreasonable steps to safeguard the assets ofthe Group and for taking reasonable stepsfor the prevention and detection of fraudand other irregularities.

The Directors are responsible for themaintenance and integrity of the Group’swebsite. Financial information publishedon the website is based on legislation inthe United Kingdom governing thepreparation and dissemination of financialstatements that may differ from legislationin other jurisdictions.

Going concern The Directors have a reasonableexpectation that the Group has adequateresources to continue in operationalexistence for the foreseeable future andtherefore continue to adopt the goingconcern basis in preparing the accounts.

Auditors Following the conversion ofPricewaterhouseCoopers to a LimitedLiability Partnership (LLP) from 1 January2003, PricewaterhouseCoopers resigned on 25 March 2003 and theDirectors appointed its successor,PricewaterhouseCoopers LLP, as auditors. A resolution to reappointPricewaterhouseCoopers LLP as auditors to the Group will be proposed at theforthcoming Annual General Meeting.

Approved by the Board of Directors and signed on its behalf

Amanda MassieCompany Secretary26 June 2003

19WS Atkins plc Annual Report 2003Report of the Directors

The Group provides a wide range oftechnology-based consultancy and supportservices. An effective system of corporategovernance is fundamental to fulfiling theGroup’s corporate responsibilities and theachievement of its financial objectives.

The policy of the Board of WS Atkins plc is to manage its affairs in accordance withthe Principles of Good Governance andthe Code Provisions set out in Section 1 of the Combined Code on CorporateGovernance in the UKLA Listing Rules.

Following the publication of the HiggsReport in January 2003 and the proposedintegration of these recommendations into the Listing Rules in July 2003 theBoard will review its corporate governanceframework during the latter half of 2003.

The provisions of the Code applicable tothe Group are divided into four parts:

Board and committee structure BoardThe Board of WS Atkins plc is the bodyresponsible for corporate governance, forestablishing policies and objectives and forthe stewardship of the Group’s resources.It is the Group’s policy that the roles ofChairman and Chief Executive areseparate. However, as an interim measurefollowing the resignation of the formerChief Executive, since 1 October 2002,these roles have been temporarilycombined until the new Chief Executive isappointed on 1 October 2003. Currentlythere are two Executive Directors and fourNon-Executive Directors. Their profiles are given on page 16.

It is the opinion of the Board that the Non-Executive Directors are independentof management and have no business orother relationship which could interferematerially with the exercise of theirjudgment.

The Board meets regularly throughout theyear and met more than 12 times during2003. In addition, Directors meet asmembers of relevant Committees. There is a formal schedule of matters reservedspecifically to the Board for decision anddelegating specific responsibilities toCommittees. Each of the Committees

has formal written Terms of Referencewhich are reviewed by the Board at regular intervals.

All Directors have access to the advice andservices of the Company Secretary, who is responsible for ensuring that Boardprocedures and applicable rules andregulations are observed. There is anagreed procedure for Directors to obtainindependent professional advice. Boardmembers receive appropriate guidance to strengthen their understanding of thebusiness and their legal obligations.

In accordance with the Group’s Articles of Association, one third of the Board isrequired 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.

Group Executive The Group Executive meets regularlythroughout the year, at least ten times. It is responsible for the management of the business and is chaired by the ChiefExecutive. Its members currently comprisethe Group Finance Director, the ManagingDirectors of the Business Units, the HumanResources Director and the CompanySecretary.

The respective roles of the Board andGroup Executive are discussed furtherunder Internal control on page 21.

Audit CommitteeThe Audit Committee comprises FrancesHeaton, James Morley and StruanRobertson, all Non-Executive Directors.Frances Heaton is Chairman. Paul Marshwas a member until his resignation. TheCommittee meets at least three times ayear. Its prime tasks are to review the scopeof the external audit, to receive reportsfrom the external and internal auditors and to review the half yearly and annualfinancial statements before they arepresented to the Board, focusing in particularon accounting policies and compliance,areas of management judgment andestimates, and the effectiveness of internalcontrol procedures.

The key elements of processes used by the Audit Committee to review theeffectiveness of the system of internalcontrol include:

• discussion with Management on riskareas identified by Management and/orthe 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 reportedby the Group Risk Committee.

AuditorsThe Audit Committee’s Terms of Referenceaddress the provisions in the CombinedCode in relation to audit committees andauditors. The Board and the AuditCommittee monitor the cost effectivenessof audit and non-audit work performed by the auditors and also consider thepotential impact, if any, on the corporaterelationship with the auditors beforeawarding any non-audit work.

The auditors continue to operateprocedures to safeguard against thepossibility that the auditors’ objectivity andindependence could be compromised. This includes the use of independentconcurring partners, use of a technicalreview board (where appropriate) andannual independence confirmations by all staff. The auditors report to the AuditCommittee on matters includingindependence and non-audit fees on anannual basis. In addition, the role of theaudit partner is rotated on a periodic basis.

Nomination committeeThe Nomination Committee comprises theChairman and up to four other Directorsthe majority of whom are Non-ExecutiveDirectors. It is responsible for thenomination for Board approval ofcandidates for Board appointment.

Corporate governance report

20 WS Atkins plc Annual Report 2003Corporate governance report

21WS Atkins plc Annual Report 2003Corporate governance report

Remuneration committeeThe Remuneration Committee comprisesStruan Robertson, Frances Heaton andJames Morley, all Non-Executive Directors.Struan Robertson is Chairman. RogerUmney was Chairman until his resignation. Paul Marsh was a member until hisresignation. The Committee is alsoattended by the Chairman, Chief Executiveand Human Resources Director, exceptwhen their own remuneration is underconsideration. The Committee meets atleast twice a year. The Committee reviewsthe Group’s policy on the ExecutiveDirectors’ remuneration and terms ofemployment and makes recommendationsupon this to the Board. It also assists in the formulation of remuneration for othersenior Managers. The Remuneration report is shown on pages 25 to 32 andincludes information on the Directors’service contracts.

Directors’ remunerationThe Remuneration report on pages 25 to 32 includes details of the remunerationpolicy and of the remuneration of theDirectors.

Internal control The Directors are responsible for theGroup’s system of internal financial andoperating controls which are designedto meet the Group’s particular needsand aim to safeguard the Group’s assetsand ensure proper accounting recordsare maintained and that the financialinformation used within the businessand for publication is reliable. Anysystem of internal control can onlyprovide reasonable, but not absolute,assurance against materialmisstatement and loss.

In 2000, the Group commenced a majorinitiative to replace the core Financeand Human Resources systems for its UK operations and to establish a newShared Services Facility (SSF) atWorcester. These new core systems andthe SSF became operational in January2002. The Board recognised the risksassociated with the changes and priorto implementation put in place furtherreview processes. Additional short-termdebt facilities were obtained from theGroup’s lending banks to allow for theexpected increase in working capital.

The introduction of these new systems,in particular the SSF, proved substantiallymore problematic and disruptive thanexpected. These problems impacted, inparticular, the Group’s cash flow. TheBoard and management recognised theseverity of the problems and a teamwas set-up to address and monitor thevarious issues arising. The results of thisteam’s work were regularly reported tothe Board, and when the underlyingnature of some of the issues becameclear the Board took immediate actionand advised shareholders.

The problems with the new systems thathad a material affect upon the financialresults have now been identified andaddressed. Remedial action is beingpursued on the outstanding issues.

Key features of the system of internalcontrol are as follows:

Group organisation and cultureBy its statements and actions the Boardemphasises a culture of integrity,competence, fairness and responsibility.

The Board focuses mainly on strategicissues, senior management andfinancial performance. The GroupExecutive concentrates on operationalperformance, operational decisionmaking and the formulation of strategicproposals to the Board. The ManagingDirectors of the Business Units managetheir businesses with the support ofsenior managers whose appointmentrequires endorsement by the GroupExecutive. The Board determines howthe Group Executive and the individualbusinesses operate within a frameworkof delegated authorities and reservedpowers which seeks to ensure thatcertain transactions, significant in termsof their size or type, are undertakenonly after high level review.

Financial reportingAnnual budgets for individualbusinesses and the Group are preparedand approved by the Board. Thefinancial performance of individualbusinesses is reported regularly andcompared to annual budgets. TheGroup reports to shareholders on a half-yearly basis. Forecasts for theGroup are prepared and reviewed by the Board regularly. However, thedifficulties encountered with the newsystems meant that for the first part of the year reliable forecasts for theGroup were not available.

Individual business controlsIndividual businesses complete anannual self-certification statement.Responsible managers personallyconfirm the adequacy of their systemsof internal control and their compliancewith Group policies. The statement also requires the reporting of anysignificant control issues that haveemerged so that areas of Groupconcern may be identified, addressedand experience shared. Apart from theissues raised by the implementation ofthe new systems referred to above, nosignificant control issues were identifiedas at 31 March 2003.

Project and contract controlProcedures seek to ensure that risks areidentified through the lifecycle frombidding to completion. Regular reviewprocedures are in place to ensure thatissues are appropriately reported to theBoard. Commercial procedures havebeen strengthened during the year bythe adoption of a Commercial Risk &Audit Framework which requires peerreview to be carried out for allsignificant bids and opportunities, orwhere significant investment decisionshave to be taken.

Functional speciality reportingThe Board assesses the risks facing thebusiness on an ongoing basis and has identified a number of key areaswhich are subject to regular reportingto the Board such as Environment,Health & Safety, Human Resources,Insurance, PFI/PPP investments andTreasury.

Risk management reviewThe Board assesses risk managementthroughout the Group, aided by theGroup Risk Committee and detailedreviews of internal controls and riskmanagement. A new Group RiskManagement Framework has beenimplemented that requires businesses formally to record all significant risksfacing each business unit. A summaryof the key risks facing the Group isreviewed regularly by the Board.

Internal AuditThe Internal Audit function within theGroup is required to undertake aprogramme to address internal controland risk management processes withparticular reference to the Turnbullreport. Its conclusions are advised tothe relevant level of management andthe function has a direct reportingresponsibility to the Audit Committeeacting on behalf of the Board. Duringthe first part of the year, the InternalAudit function was used substantiallyto support the Group’s new financialreporting processes.

The Board confirms that there is acontinuing process for identifying,evaluating and managing the risks facedby the Group and that the process has been in place for the year under review and remains current. A fullreview of the internal control and risk management framework wasundertaken during the year and a number of steps taken to re-inforceit, as detailed above.

The Audit Committee has reviewed the operation and effectiveness of theframework, which operated during theperiod covered by the Directors’ reportand Financial statements, up to andincluding the date of approval by the Board.

Relations with shareholders Communication with all shareholders isgiven a high priority. The Annual Reportand Interim Reports are sent to allshareholders and all shareholders areinvited to the Company’s Annual GeneralMeeting, which is attended by the full Board.

The Group also has a website(www.atkinsglobal.com) that containsinformation on its activities, includingrecordings of the Annual and Interimresults presentations to City analysts andinstitutional investors.

The Board welcomes the views of allshareholders. The Group has an on-goingprogramme of dialogue and meetingsbetween the Directors and its majorinstitutional shareholders, where a widerange of relevant issues including strategy,performance, management and CorporateGovernance are discussed.

The Annual Report is designed to present a balanced and understandable view ofthe Group’s activities and prospects. TheChairman’s statement, Operating reviewand Financial review on pages 4 to 15provide an assessment of the Group’saffairs and position and will be supportedby a presentation to be made at theAnnual General Meeting.

Compliance with the Combined CodeThe Company has complied throughoutthe year with the provisions stated inSection 1 of the Combined Code exceptfrom 1 October 2002 when the roles ofChairman and Chief Executive weretemporarily combined as an interimmeasure pending the appointment of thenew Chief Executive on 1 October 2003.

Approved by the Board of Directors andsigned on its behalf

Amanda MassieCompany Secretary26 June 2003

Corporate governance report continued

22 WS Atkins plc Annual Report 2003Corporate governance report

23WS Atkins plc Annual Report 2003Corporate social responsibility report

Corporate social responsibility report

IntroductionThe Group aims to demonstrate a highstandard of corporate social responsibility(CSR) based on the implementation ofsound policies and good practice.

The Group’s Safety, Health andEnvironment Advisory Committee (SHEAC)was formed last year to address CSR issuesand to make recommendations to theBoard regarding the Group, its staff,customers and stakeholders. TheCommittee, which reports to the Board on a quarterly basis, is chaired by theManaging Director of Rail and includessenior managers from each of the Group’sbusiness units. Two external advisors have also been appointed to provide the Committee with independent strategic advice.

The Quality, Safety & Environment (QSE)Managers’ Forum, formed in December2002, reviews operational health & safetyand environmental performance across theGroup and makes recommendations tothe SHEAC as part of the continuousimprovement process.

During 2004 the Group aims to furtherintegrate overall QSE strategy further and to produce an integrated Group QSEpolicy manual.

Health & Safety The Group is committed to creating andmaintaining a culture which provides asafe working environment for employees.The Group’s Health and Safety Policy ispublished on the intranet.

The Chief Executive is responsible forhealth and safety matters at Board leveland reports on these monthly. The Boardalso receives an annual update on healthand safety legislation and best practice.Each business unit has a nominated QSEco-ordinator.

The Group’s safety record has beensignificantly better than the nationalaverage and this achievement wasrecognised by the award of the RoyalSociety for the Prevention of Accidents’Order of Distinction to our AssetManagement business. The Group’sAccident Incidence Rate (AIR) for 2003 was 280 (2002: 276), well below theHealth Safety Executive’s (HSE) AIR targetfor industry generally (631) and the serviceindustry specifically (478).

During the year, the Highways andTransportation business achievedcertification for Occupational Health andSafety Assessment Series (OHSAS) 18001.WS Atkins Rail Limited is the first railcompany to have its Railway Safety Caseapproved by the HSE for possession only work.

EnvironmentThe Group continues to consider theimpact of its business activities on theenvironment and has taken steps toimprove its performance during the year,including:

• conducting a review of theenvironmental impact of the Group’sbusiness support activities, includingassessing business travel in the Group’sUK businesses, and monitoring gas,electricity and water consumption, wastegeneration and recycling;

• reviewing the Group’s EnvironmentalPolicy Statement, which sets thestandard for those undertaking duties on behalf of the Group;

• implementing a Group-wideenvironmental management frameworkto provide all businesses with clearguidance and protocols; and

• producing a corporate EnvironmentalReport, which is published on ourwebsite (www.atkinsglobal.com). It isintended to update this report annually.

In the coming year, the Group willbenchmark the energy efficiency of keyareas of its facilities and set realistic targetsfor improvement.

The Chief Executive is responsible forenvironmental matters at Board level andreports on these monthly.

The Ethical Investment Research andInformation Services (EIRIS) and Business in the Environment (BiE) have included the Group in their surveys. The Group’sindex score in BiE Index of CorporateEnvironmental Engagement rose duringthe year to 56% (2002: 39%).

Environmental Management Systems (EMS)This year the Group implementedenvironmental management systems andprocedures which provide the business with clear guidance and protocols.

During the year, both Rail and Environmentand Sustainable Solutions (part of Design,Environment and Engineering) wereawarded the internationally recognised BS EN ISO 14001 and the Highways andTransportation business successfullyachieved this certification for all products,activities and services. Further businessunits are currently pursuing certificationand the aim is to have approximately 50%of UK operations covered by EMS andcertified to ISO 14001 by December 2004.

Environmental awareness,communications and trainingThe Group has developed training courses(externally certified by the Institute ofEnvironmental Management &Assessment) covering environmentalauditing and EMS implementation,together with an in-house environmentalhandbook available to all staff working orvisiting our project sites.

Incidents and prosecutionsThe Group had no prosecutions relating to environmental incidents in the last yearalthough there were a number of incidentswhere the Environment Agency wasinvolved and summarily investigated theoccurrence. None of these investigationsled to a formal indication of the Groupbeing at fault.

Quality assuranceEffective quality management continues to be crucial in sustaining a competitiveadvantage through the high standard ofour work. The Group continues tomaintain its existing registrations of qualitysystem approval satisfactorily. Approval to ISO 9001: 2000 has been the focus ofattention, recognising that all approvals to the 1994 version of the Quality SystemStandard will no longer be valid afterDecember 2003. A number of units havealready achieved approval to the newStandard. The remaining businesses areactively implementing managementprogrammes to ensure that approval isachieved before the deadline.

PeopleAtkins is a people-based business whichprospers to the extent that it is able toharness, develop and deploy the energiesand skills of its employees. Humanresources (HR) objectives are thereforelinked closely to wider business objectivesand are to:

• recruit and retain staff with the best skillsavailable across the markets in which theGroup operates;

• provide a working environment withinwhich the skills of our employees can be used effectively, promoting resourcesharing and skills transfer across theGroup;

• invest in the development of ouremployees to meet the growing needs ofthe Group and its customers for a widerange of management, professional andtechnical skills;

• reward staff on the basis of performanceand provide an opportunity for them tobecome and remain shareholders in theGroup;

• strive to remain an “employer of choice”,particularly for graduate recruits; and

• deal with all staff equitably as well asmanaging the employment liabilities of the Group.

The Human Resources Director hasresponsibility for HR issues within theGroup and reports to the Chief Executive,who is responsible for HR issues at Board level.

ResourcingThe Group continues to be a majorrecruiter of talent across the sectors inwhich it operates. During 2003, over2,000 staff joined the Group. The Groupcontinues to invest in its recruitmentprocesses to ensure selection of staff withthe right competence and experience tomeet the changing needs of the Groupand its customers.

Each year the Group recruits in excess of 250 graduates from UK universities. An increasing number of candidatesinvestigate career opportunities and make their initial applications on-line viawww.whyatkins.com.

Employee developmentThe Group has made a significantinvestment in management developmentand training in recent years in order toensure that we are able to meet themajority of our management needs fromwithin the Group. Structured managementand senior management developmentprogrammes operate across the Group.These have proved extremely effectiveboth in identifying and developing a substantial population of capablemanagers and in significantly improvingretention rates. Development of skills forline managers is a key target for 2004.

A structured development programme is inplace for graduates, accredited by a widerange of professional institutions includingall the major engineering institutions. Allstaff have access to a portfolio of in-houseprofessional and technical training coursescovering areas such as health and safety,project management, commercial skills,communication and interpersonal skillsand specific job related training. The use of personal development plans (appraisals)is promoted across the Group in order to improve objective setting andperformance management and to supportcontinuous professional development.

Working environmentThe Group regularly seeks the views ofemployees on a range of issues affectingtheir employment. A confidential survey is conducted regularly covering all UKbased staff. This is used to identify areaswhere more needs to be done to engageand motivate our employees. Overseasbusinesses typically conduct similar surveys locally.

The survey covers a range of issuesincluding communication, training anddevelopment, effective use of skills andresources across the Group. The results are collected and presented to allowcomparison of performance internallybetween business units and externallyagainst other leading employers. Thefindings are then used to help to setcorporate and individual objectives for the year ahead.

RewardWhilst remuneration practices vary acrossthe Group, in line with good practice foreach of the markets within which theGroup operates, overall objectives are to:

• pay competitive salaries to recruit andretain staff with the right skills andexperience;

• reward individuals on the basis ofperformance; and

• provide a range of employee benefitsappropriate to each market.

Remuneration policy and practice are keptunder regular review.

Equal opportunitiesThe Group is committed to the fair andequitable treatment of all its employeesirrespective of gender, race, disability orsexual orientation. Policies have beenimplemented across the Group to ensurethat this commitment is fulfilled.

The Group’s policy and practice is toencourage the recruitment andsubsequent training, career developmentand promotion of disabled people on thebasis of their aptitude and abilities, and theretention and re-training of employeeswho become disabled.

In South Africa, the Group is a 38.25%shareholder in TFMC (Proprietary) Ltd, acompany established to provide assetmanagement services to South AfricaTelkom. The company has made significantcommitments to employment equity ingeneral and to black economicempowerment. These include specifictargets in relation to achieving 50%representation of previously disadvantagedindividuals in management positionswithin two years and similarly to exceeding50% of its bulk supply chain spend with qualifying enterprises in the sametime frame.

Employment liabilitiesThe employment liabilities of the Groupare kept under careful review and action is taken to contain these liabilities whereappropriate. These include pension fundliabilities and liabilities arising as a result of staff joining the Group on contractswhere TUPE has applied.

Corporate social responsibility report continued

24 WS Atkins plc Annual Report 2003Corporate social responsibility report

25WS Atkins plc Annual Report 2003Remuneration report

IntroductionThe Remuneration report has beenprepared in accordance with the DirectorsRemuneration Regulations 2002 (theRegulations) and Schedule B of theCombined Code. As required by theRegulations, a resolution to approve thereport will be proposed at the AnnualGeneral Meeting (AGM) at which thefinancial statements of the Group will be presented for approval.

Remuneration committeeThe Remuneration Committee comprisesStruan Robertson, Frances Heaton andJames Morley, all Non-Executive Directors.Struan Robertson is Chairman. RogerUmney was Chairman until his resignation.Paul Marsh was a member until his resignation.

The Remuneration Committee’s purpose is to review, on behalf of the Board, the remuneration policy for Executive Directors and to determine the level ofremuneration, incentives and otherbenefits, compensation payments and terms of employment of each ExecutiveDirector. It also seeks to provide a remuneration package that aligns theinterests of Executive Directors with thoseof the shareholders. The RemunerationCommittee also reviews the salaries andbenefits for senior staff reporting to theChief Executive.

The Committee has appointed New BridgeStreet Consultants to provide externalindependent advice to the Committee on remuneration policy and practice forDirectors and Senior Executives, and toassist the Committee in the developmentof short and long term incentive schemes.Clifford Chance LLP has provided legaladvice on the incentive schemes.

The Committee meets at least twice a year.For the year ended 31 March 2003 theCommittee met eight times. The ChiefExecutive and Human Resources Directorattend the meetings by invitation and areconsulted about the Committee’s proposals,except when their own remuneration is under consideration. The CompanySecretary also attends the meetings andprovides advice where required.

Remuneration policyThe objectives of the Group’sremuneration policy are to attract, retainand incentivise management withappropriate professional, managerial andtechnological expertise to realise theGroup’s business objectives, and to aligntheir interests with those of shareholders.This is achieved through maintaining an appropriate balance between basicsalaries, bonuses and shares.

During the year the Committee reviewedoverall levels of remuneration and thebalance between these elements to ensurethat packages remained competitive andin the best interests of the Group. Thisexercise was supported by New BridgeStreet Consultants who undertook areview of remuneration levels andstructures across a comparator group ofbusinesses. These were selected havingregard to the size of the Group, thebusiness sectors in which it operates, itsdiversity and geographical spread.

The remuneration packages agreed by theCommittee for the Executive Directorscontain the following elements:

• basic salary;

• performance bonus payable for theachievement of in-year targets;

• longer term share incentives; and

• pension and other benefits.

Basic salaryThe Committee establishes salaries byreference to those prevailing in theemployment market generally forExecutive Directors of comparable status,taking into account the size and range ofresponsibilities held by different executives.

Basic salaries are set at a level whichcorresponds broadly with the mediansalaries for executives in comparablebusinesses. Salaries are normally reviewed annually.

Other benefits for Executive Directorsinclude a car and payment of its operatingexpenses and fuel, life assurance andentitlement to a non-contributory privatehealth care scheme.

Bonus and long term incentive plansprovide executives with the opportunity toincrease overall remuneration levels to theupper quartile for comparable businessesbut only following the achievement ofdemanding performance targets.

Performance bonusExecutive Directors are eligible to receiveup to 60% of their salary as a bonus forthe achievement of financial year Groupperformance and personal targets. Inexceptional circumstances, theRemuneration Committee may resolve toaward bonuses up to 80% of salary. Thetargets against which bonuses are paid are reviewed annually.

Key senior managers are also eligible toreceive a bonus for the achievement ofGroup, divisional and individualperformance targets. They are offered theopportunity to invest in the Group bytaking part or all of their bonus in the formof a right to acquire ordinary shares underthe Deferred Bonus Plan. This is designedto promote the retention of senior staff.

Bonus awards are non-pensionable andnon-contractual.

Long term share incentivesVarious long term incentive plans are inplace with the objective of aligning theinterests of participants and shareholdersin generating satisfactory businessperformance and investment return. TheCommittee commissioned a review ofthese plans by New Bridge StreetConsultants, with the objective ofsimplifying the current arrangements andupdating performance conditions.

The review recommended retention of theexisting bonus arrangements summarisedabove and modifications to the WS Atkins1997 Senior Executive Long Term IncentivePlan (Senior Executive Plan II) in line withcurrent best practice. It is proposed thatthese changes will apply for all awardsmade subsequent to the Company’s AGMon 16 September 2003. Awards prior tothat date will be subject to the existing rules.

Remuneration report

At the forthcoming AGM it will berecommended to shareholders that therules of the Senior Executive Plan II beamended. The proposed amendmentsinclude the following:

• The performance conditions will bebased on total shareholder return (TSR),with an earnings per share (EPS) underpin.

• Full vesting of any award will take placefor a top 20% ranking against a groupof comparator companies, 30% for amedian ranking, with no award if TSRfalls below the median.

• The EPS underpin is proposed as RetailPrice Index (RPI) plus 2% per annum.

This combination is designed to rewardmanagement performance in deliveringboth absolute growth and relativeperformance against similar companies.

The Remuneration Committee will choose appropriate comparatorcompanies for each year’s grant. Theproposed comparator companies for thegrant after the AGM will include AEATechnology plc, Amec plc, WS Atkins plc,Balfour Beatty plc, Capita plc, Carillion plc,Interserve plc, Jarvis plc, Kier plc, McAlpineplc, Mowlem plc and Serco plc (with adiscretion for the RemunerationCommittee to add or remove companiesto take account of change incircumstances). The RemunerationCommittee considers that the comparatorgroup should comprise up to 16companies and will seek to add furthercompanies in due course as appropriate.

• Change of control will only result investing pro-rata to the extent to whichthe above TSR performance conditionhas been met at that date of change of control.

• In addition to the use of existing shares,awards will also be capable of beingsatisfied using new issue shares.

Full details of the proposed changes are set out in the Notice of the AGM.

It is proposed that the performance periodwill commence from 1 April 2004 inrespect of awards made following the2003 AGM.

The Executive Directors and other keysenior managers will continue toparticipate in this plan. It is also intended to broaden the plan to key staff belowsenior manager level.

Subject to approval of these changes byshareholders, the main plans which theCompany will operate will be the SeniorExecutive Plan II and the Deferred BonusPlan, both of which will be used to rewardand incentivise Executive Directors and key senior managers. The EPPs will be discontinued.

Summary of existing share plans

WS Atkins 1997 Senior Executive LongTerm Incentive Plan (Senior ExecutivePlan II)The Senior Executive Plan II was establishedto provide a continuing incentive forExecutive Directors and senior managers.As explained above, there will be arecommendation at the forthcoming AGM to amend the rules of the Plan forfuture awards.

Participants may receive the right to acquireshares held in the Employee Benefit Trusts(EBTs), such right to become exercisablethree years from the date of grant of theaward and subject to the attainment of challenging performance conditions.

For awards granted after the AGM, if theresolution to amend the rules is passed,the performance conditions will be based on TSR with an EPS underpin.

For awards granted prior to the AGM, ifthe increase in earnings per ordinary shareis more than 12% points per annumabove the UK RPI in the relevant three yearperformance period then all of theordinary shares can be acquired, but if theearnings per ordinary share growth is lessthan 5% points per annum above the UKRPI then none of the ordinary shares canbe acquired. A sliding scale in relation tothe number of ordinary shares that may beacquired operates for growth in earningsper ordinary share between 5% and 12%points above the UK RPI.

No awards were made during the financialyear ended 31 March 2003. It is intendedto make awards to Executive Directorsshortly after the announcement of thepreliminary results for the year ended 31 March 2003 under the existing ruleswith the three year performance periodcommencing 1 April 2003. It is proposedto make awards following the AGM toExecutive Directors and key seniormanagers under the new rules with thethree year performance period starting 1 April 2004.

Deferred Bonus PlanThe Deferred Bonus Plan was establishedto provide an opportunity for key seniormanagers to invest in the Company bytaking part or all of their bonus in the formof a right to acquire ordinary shares whichvest three years from the date of grant.Executive Directors are not currentlyeligible to participate in the plan, howeverit is proposed to recommend toshareholders at the forthcoming AGM thatthe rules of the Plan be amended so as toallow the Executive Directors to participate.

Equity Participation Plans (EPPs)There are two plans by which bonusesmay be converted to shares in both currentand future financial years. Each plan has a different tax treatment and it is for theindividual to choose which EPP is preferred.Both were designed to encourageparticipants to invest in the Group bytaking all or part of their bonus in the formof ordinary shares or a right to acquireordinary shares, which if retained for athree year period, will give managers aright to obtain a matching number ofordinary shares, currently held by the EBTs.

Remuneration report continued

26 WS Atkins plc Annual Report 2003Remuneration report

The right to the matching ordinary sharesis subject to performance conditions similarto those in the Senior Executive Plan II.

One award was made under the terms ofthis Plan during the financial year ended31 March 2003 to Robin Southwell, thematching element of which lapsed on his resignation. Details can be found onpage 32. It is intended to make awards to Stephen Billingham and to key seniormanagers shortly after the announcementof the preliminary results for the yearended 31 March 2003 under the existingrules with the three year performanceperiod commencing 1 April 2003. Theseawards will be made in recognition ofexceptional performance by a group of key executives and for the achievement ofdemanding recovery targets during 2003.However, beyond 2003, it is not intendedto make any further awards under thesePlans, subject to shareholder approval of the proposed amendments to theDeferred Bonus Plan.

WS Atkins 1997 Executive Long TermIncentive Plan (Executive Plan III)The Executive Plan III was established toprovide a continuing incentive to selectedkey staff below senior manager level notparticipating in the Senior Executive Plan II.It is intended that, conditional upon theresolution to amend the rules of the SeniorExecutive Plan II being passed at theforthcoming AGM, any future long termincentive awards to key staff below seniormanager level will be made under SeniorExecutive Plan II, and accordingly nofurther awards will be made under theExecutive Plan III.

Participants in the Executive Plan III mayreceive the right to acquire shares currentlyheld in the EBTs to be exercisable in threeyears from the date of grant. If the increasein earnings per ordinary share is more than6% points per annum above the UK RPI inthe three year performance period, then allof the ordinary shares can be acquired, butif the earnings per ordinary share growth isless than 2% points per annum above theUK RPI then none of the ordinary sharescan be acquired.

A sliding scale operates for growth inearnings per ordinary share between 2%and 6% points above the UK RPI.

Geared Option Scheme (GOS) The Geared Option Scheme (formerlycalled the WS Atkins 2000 Key EmployeeIncentive Plan), which was approved by shareholders in August 2000 wasamended by the RemunerationCommittee in September 2001, July 2002and January 2003. The approved plan,utilising an investment company, wasreplaced by an option arrangementfollowing negotiations with the InlandRevenue and the arrangement preservesthe commercial aspects of the GOS.

The maximum amount which a participantmay invest in the plan was 100% of basic salary (excluding benefits in kind)expressed as an annual rate payable on thedate he was invited to participate in theplan. The funds were used to buy shareswhich were deposited with the Trustee of an EBT (deposited shares).

A participant is granted an award (a Matching Award) which is an option to acquire shares worth a multiple of theamount invested in the plan. The multipleis decided by the Trustee prior to the grantand being not more than ten and not lessthan four. The exercise price is determinedby the price paid by the Trustee topurchase the shares on the London StockExchange. The Matching Award becomesexercisable in tranches of 20%, 30% and50% after 3, 4 and 5 years respectively.

The shares which a participant hasdeposited with the Trustee are at risk, sinceif the Matching Award lapses unexercised(on the earliest of the participant leavingemployment, 10 years after grant or theparticipant seeking to withdraw hisdeposited shares), the participant hasagreed to give some or all of these sharesto the Trustee to the extent that theTrustee makes a loss from holding theshares subject to the Matching Award(taking into account interest costs anddividends). Accordingly, if the share pricedeclines, or fails to increase by more thanthe cost of borrowing less dividends, theparticipant may lose some or all of theshares he has deposited.

No awards were made during the financialyear ended 31 March 2003 and it is notintended to make any further awardsunder this plan.

All-employee share plansAll employees and the Executive Directorsare eligible to participate in the InlandRevenue approved UK Sharesave Scheme.It is not intended to grant options underthis scheme during the financial yearended 31 March 2004.

An International Sharesave Scheme fornon-UK resident employees is operated in some territories. An Employees’ StockPurchase Plan is operated in the US. It isnot intended to grant options under theseschemes during the financial year ended31 March 2004.

Approval for a Share Incentive Plan wasgiven by shareholders on 8 August 2000and by the Inland Revenue on 6 April2002. No grants were made during thefinancial year ended 31 March 2003. It isnot intended to grant any awards underthis plan during the financial year ended31 March 2004.




Retirement benefits Pension and life assurance benefitsprovided to the Executive Directors arecomparable to those provided by othercompanies. The pension arrangementprovided by Atkins is called the WS AtkinsStaff Retirement Benefits Plan (the Plan)which is approved by the Inland Revenue.The Plan is administered by a board ofTrustees. The Executive Directors holdbenefits in the defined benefit section ofthe Plan, which provides a 40ths accrualrate and a normal retirement age of 60.

In addition to his normal benefits under the Plan, Ric Piper who resigned from the Board on 1 October 2002 had anadditional unfunded pension promise withbenefits being paid under the Plan. RobinSouthwell, who left on 30 September2002, had funded personal pensionarrangements.

As from 1 April 2003, the pension benefitsin respect of Michael Jeffries will beprovided under an Executive Pension Planon a defined contribution basis.

Executives Directors’ contractsExecutive Directors’ Service Agreementswill terminate when the Director reachesthe age of 60 and are otherwiseterminable on giving 12 months notice.Copies of each Director’s ServiceAgreement will be available for inspectionprior to and during the AGM.

The current service contracts do notprovide for predetermined amounts ofcompensation in the event of earlytermination of the service contracts.However, the Group is reviewing servicecontracts for Executive Directors and otherkey managers to identify changes whichmay be appropriate in the light of currentbest practice.

Performance graphIn accordance with the DirectorsRemuneration Report Regulations 2002the following performance graphcompares the Group’s total shareholderreturn (TSR) compared with theperformance of the FTSE 250 Indexexcluding investment trusts over the pastfive years. This is considered the mostappropriate index against which tomeasure performance as the Companywas a member of the FTSE 250 for themajority of the five year period.

TSR is defined as the return shareholderswould receive if they held a notionalnumber of shares and received dividendson those shares over a period of time.Assuming that the dividends are re-invested into the Group’s shares, itmeasures the percentage growth in theGroup’s share price together with the valueof any dividends paid.

Non-Executive Directors The Non-Executive Directors of the Grouphave letters of appointment stating theirannual fee, and that their appointmentmay be terminated with six monthswritten notice. The remuneration of theNon-Executive Directors is determined bythe Board within the limits set out in theArticles of Association and on the basis ofindependent advice and the level of feespaid to Non-Executive Directors ofcomparator companies. The annual feesare specific to each Director reflecting theirindividual commitments to the Board andvarious Board committees. Non-ExecutiveDirectors are not eligible for pensions,share incentives, annual bonus or anysimilar payments other than out-of-pocketexpenses in connection with theperformance of their duties. Each Non-Executive Director withdraws from theRemuneration Committee in respect ofmatters relating to their own position.

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1998 1999 2000 2001 2002 2003Year ended 31 March

WS Atkins plcFTSE 250 excluding investment trusts


EmolumentsThe aggregate emoluments in respect of their roles as Directors, excluding pensions, of the Directors of the Company who served duringthe year were as follows:

Salary/ Bonus and Other Other Non-cashfees profit share(9) benefits(10) payments emoluments Total(11)

£000 £000 £000 £000 £0002003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

Executive DirectorsStephen Billingham(1) 113 – 2 – 6 – – – 140(12) – 261 –Michael Jeffries 238 121 251 6(7) 18 14 – – – – 507 141Ric Piper(2) 126 217 25(7) 32(7) 12 15 – – – – 163 264Robin Southwell(3) 175 333 – – 31 28 400(8) – – 15(14) 606 376

Total Executive Directors 652 671 278 38 67 57 400 – 140 15 1,537 781

Non-Executive Directors Frances Heaton 36 35 – – 2(13) – – – – – 38 35Christopher Kemball(4) 25 – – – – – – – – – 25 –Paul Marsh(5) 20 – – – – – – – – – 20 –James Morley 28 26 – – – – – – – – 28 26Struan Robertson 31 26 – – – – – – – – 31 26Roger Umney(6) 19 30 – – – – – – – – 19 30

Total Non-Executive Directors 159 117 – – 2 – – – – – 161 117

Aggregate emoluments (excluding pensions)(11) 811 788 278 38 69 57 400 – 140 15 1,698 898

(1) Stephen Billingham was appointed a Director on 1 October 2002.(2) Ric Piper resigned as a Director on 1 October 2002.(3) Robin Southwell resigned as a Director on 30 September 2002.(4) Christopher Kemball was appointed a Director on 14 May 2002.(5) Paul Marsh was appointed a Director on 14 May 2002 and resigned as a Director on 10 April 2003.(6) Roger Umney resigned as a Director on 1 October 2002.(7) Includes a benefit due to the Director following the exercise of options under the Equity Participation Plan or Long Term Incentive Plan equivalent

to the amount of dividends paid per share in the financial years up to the exercise date.(8) Robin Southwell’s employment terminated on 30 September 2002 and he was paid compensation for loss of office of £399,810. In addition

a contribution of £76,000 was made to the defined contributions pension arrangement in which Robin Southwell participated (although thiscontribution included approximately £23,000 reflecting a shortfall of pension contributions during his employment). The compensation paymentsreflected Robin Southwell’s contractual entitlement to a payment equal to the value of 12 months’ salary, pension contributions and other contractualbenefits. In addition, he was paid £18,750 in respect of legal fees and outplacement support.

(9) Bonus and profit share refers to amounts payable in cash.(10) Benefits include such items as company cars, fuel and medical insurance.(11) Total excludes pension contributions, which are detailed below.(12) Stephen Billingham has elected to take his bonus in the form of a right to acquire shares under the Pre-Tax Equity Participation Plan. An award of shares

to an aggregate value of £140,000 will be granted on 30 June 2003 based on the closing mid-market price on 27 June 2003. This translates into a bonus option of 49,382 shares with a Matching Award of 49,382 shares subject to the terms of the EPP.

(13) Other benefits relate to re-imbursement of business expenses.(14) Robin Southwell elected to take his bonus in the form of a right to acquire shares under the Pre-Tax Equity Participation Plan.



Retirement benefitsIn the event of death whilst in employment, a capital sum equal to four times pensionable salary is payable together with a spouse’spension of 50% of the member’s accrued plus future prospective service to age 60 limited to a maximum of 10 years if joined the pensionplan after 31 March 1997, and children’s allowances. For death in retirement, a spouse’s pension of 50% of the member’s pre-commutation pension is payable. In the event of death after leaving service but prior to commencement of pension, a spouse’spension of 50% of the accrued pension is payable. In the event of early retirement through ill health, protection is at the discretion of theTrustees. Early retirement at the member’s choice is possible from the age of 50, subject to actuarial reduction of the pension payable.

Post-retirement pensions are subject to increases of 5% per annum on all service to 31 March 2001 for members who joined the pensionplan before 31 March 1996. From 1 April 2001 pension increases will be the same as for members who joined after 31 March 1996, thatis, increases in the 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.

Increase inaccrued

Accrued transfer AccruedAccrued Accrued Benefit transfer value transfer

entitlement entitlement during value at Member net of value atYears of at year end at year end the year year end contributions member year end

Age at service at 31.3.03(7) 31.3.02(7) 31.3.03(5) 31.3.03(8) during year(3)contributions(8)31.03.02(8)

31.03.03 31.3.03 £000 p.a. £000 p.a. £000 £000 £000 £000 £000

Stephen Billingham 44 2 6 3 3 22 5 (3) 20Michael Jeffries(1) 58 27 196 183 8 3,851 4 493 3,354Ric Piper(2) 50 9 22 20 1 219 3 (29) 245Robin Southwell(6) 43 1 – – – – – – –

(1) The pension for Michael Jeffries is based on two-thirds of final gross pensionable salary at age 60.(2) Ric Piper has an unfunded pension promise (not included in the above table) to provide comparable benefits to other Executive Directors who joined

before 31 May 1989. Actuarial calculations are re-stated on a market value basis to show an accumulated value of £244,220 (2002: £411,000).(3) Contributions were paid in the year by the Directors participating in the Scheme at 3% of net pensionable salary in accordance with the terms

of the Scheme. (4) Members of the Scheme have the option to pay additional voluntary contributions. Neither the additional voluntary contributions nor the resulting

benefits are included in the above table.(5) The increase in accrued benefits excludes inflation in year.(6) As described on page 29, as part of the arrangements agreed in connection with the termination of his employment, the sum of £76,000 was paid

into the defined contribution scheme in respect of Robin Southwell (2002: £66,000). The £76,000 includes a payment of £23,000 reflecting a shortfall of pension contributions during his employment.

(7) The accrued entitlement is the pension the Director had earned up to the end of the year.(8) All transfer values have been calculated on the basis of actuarial advice in accordance with the Actuarial Guidance Note GN11. The accrued transfer

values represent the value of assets that the pension scheme would need to transfer to another pension provider on transferring the Scheme’s liability in respect of the Director’s pension benefits earned in respect of qualifying services. They do not represent sums payable to individual Directors andtherefore cannot be added meaningfully to annual remuneration. The increase in transfer values less member contributions is the increase in transfervalue of the accrued benefits in respect of qualifying services during the year after deducting the Director’s personal contributions to the Scheme.


Directors’ interestsThe beneficial interest of the Directors and their families in the ordinary shares of 0.5p each in the Company at 31 March 2003 were as follows:

At 31.03.03 or At 31.03.02 ordate of termination date of appointment

Executive DirectorsStephen Billingham – –Michael Jeffries 623,604 622,944Ric Piper 294,600 326,264(1)

Robin Southwell 48,321(2) 48,321(2)

966,525 997,529

Non-Executive DirectorsFrances Heaton 45,300 45,300Christopher Kemball – –Paul Marsh 1,557 –James Morley 1,250 1,250Struan Robertson 984 984Roger Umney 32,500 29,000

81,591 76,534

Total 1,048,116 1,074,063

(1) 31,664 shares were held on behalf of Ric Piper as deposited shares under the Geared Option Scheme (formerly the WS Atkins 2000 Key EmployeeIncentive Plan). These shares were forfeited on 1 October 2002 when Ric Piper resigned. His award in respect of Matching Shares under the Schemelapsed on the date of termination of his employment.

(2) Prior to the termination of his employment on 30 September 2002, Robin Southwell had made a personal investment of 48,321 ordinary shares in theacquisition of deposited shares under the Geared Option Scheme. The rules of the Scheme have been adjusted to provide that those deposited shareswere not automatically forfeited on termination of his employment, but continue to be held on his behalf by the Scheme Trustee as if he had remainedin employment. The deposited shares are still subject to risk of forfeiture but can be released in full to the extent that no loss is suffered in respect ofshares purchased as Matching Shares. If the value of the deposited shares after compensating for any loss in Matching Shares recovers to the sumoriginally invested, the deposited shares will be released automatically so that he receives back no more in value than the amount originally invested by him. His award in respect of Matching Shares under the Plan lapsed on the date of termination of his employment.

As at 31 March 2003, each of the Directors was deemed to be interested as a potential beneficiary under the Employee Benefit Trusts in 6,597,037 ordinary shares of 0.5pence each (2002: 6,716,682). Details of the Directors’ personal interests in the EBTs are given on page 32.



Share options and long term incentives

No of shares No of shares Midunder option under option Marketat 01.04.02 at 31.03.03 Market price at Gain on First Date

Scheme Award or date of or at date of Option price on date of exercise date of lapseName Name (4) date appointment Granted Exercised Lapsed termination Price exercise grant £ exercisable of option

StephenBillingham(5) EPP – Bonus 18/7/01 788 – – – 788 0.0p – 782.5p – 18/7/04 18/7/08

EPP – Matching* 18/7/01 788 – – – 788 0.0p – 782.5p – 18/7/04 18/7/08Senior Executive Plan II* 18/7/01 12,012 – – – 12,012 0.0p – 782.5p – 18/7/04 18/7/08SAYE 06/7/01 186 – – – 186 666.0p – 807.5p – 01/9/04 01/3/05SAYE 22/8/02 – 161 – – 161 259.2p – 287.5p – 1/11/05 01/5/06

Total 13,774 161 – – 13,935 –Michael Jeffries(5) EPP – Bonus 18/7/01 8,258 – – – 8,258 0.0p – 782.5p – 18/7/04 18/7/08

EPP – Matching* 18/7/01 8,258 – – – 8,258 0.0p – 782.5p – 18/7/04 18/7/08Senior Executive Plan II* 21/9/01 53,932 – – – 53,932 0.0p – 667.5p – 21/9/04 21/9/08

Total 70,448 – – – 70,448 –Ric Piper EPP – Bonus 11/1/00 12,400 – 12,400)(1) – – 0.0p 127.0p 700.0p 15,748 11/1/03 11/1/07

EPP – Matching* 11/1/00 12,400 – – 12,400)(1) – 0.0p – 700.0p – 11/1/03 11/1/07EPP – Bonus 20/7/00 5,159 5,159)(1) – – 0.0p 127.0p 742.5p 6,551 20/7/03 20/7/07EPP – Matching* 20/7/00 5,159 – – 5,159)(1) – 0.0p – 742.5p – 20/7/03 20/7/07EPP – Bonus 18/7/01 6,006 6,006)(1) – – 0.0p 127.0p 782.5p 7,627 18/7/04 18/7/08EPP – Matching* 18/7/01 6,006 – – 6,006)(1) – 0.0p – 782.5p – 18/7/04 18/7/08Senior Executive Plan II* 12/6/00 47,808 – – 47,808)(1) – 0.0p – 627.5p – 20/7/03 20/7/07Senior Executive Plan II* 18/7/01 25,825 – – 25,825)(1) – 0.0p – 782.5p – 18/7/04 18/7/08SAYE 16/7/99 456 – – 456 – 424.0p – 503.5p – 01/9/02 28/2/03SAYE 07/7/00 239 – – 239 – 502.0p – 658.5p – 01/9/03 29/2/04SAYE 06/7/01 186 – – 186 – 666.0p – 807.5p – 1/11/04 01/3/05GOS)(3) 28/9/01 316,642 316,642 – 724.9p – 689.0p – 28/9/04 28/9/11

Total 438,286 – 23,565 414,721 – 29,926Robin Southwell EPP – Bonus 09/8/02 – 4,838 4,838)(2) – – 0.0p 122.0p 312.5p 5,902 09/8/05 09/8/12

EPP – Matching 09/8/02 – 4,838 – 4,838)(2) – 0.0p – 312.5p – 09/8/05 19/8/12Senior Executive Plan II* 18/7/01 39,639 – – 39,639)(2) – 0.0p – 782.5p – 18/7/04 18/7/08SAYE 22/8/02 – 161 – 161 – 259.2p – 287.5p – 1/11/05 01/5/06GOS(3) 28/9/01 486,008 – – 486,008 – 724.9p – 689.0p – 28/9/04 28/9/11

Total 525,647 9,837 4,838 530,646 – 5,902Aggregate gains on share options 2003 35,828Aggregate gains on share options 2002 1,753

*Subject to performance criteria as described on page 26.(1) Ric Piper ceased to be a Director and an employee of the Company on 1 October 2002. In accordance with the scheme rules of the EPP, Mr Piper was

permitted to exercise the bonus element of the award. However the matching element of the award lapsed on the termination of his employment. His awards under the Senior Executive Plan II also lapsed on the cessation of his employment.

(2) Robin Southwell ceased to be an employee on 30 September 2002. In accordance with the rules of the EPP Mr Southwell was permitted to exercise thebonus element of the award. However the matching element of the award lapsed on the termination of his employment. His awards under the SeniorExecutive Plan II also lapsed on the termination of his employment.

(3) The Group made available a multiplier of each share purchased by the Executive Director. The option price increases on a monthly basis.(4) Scheme Names:

EPP – Equity Participation PlanGOS – Geared Option SchemeSAYE – Savings related share option scheme (Sharesave) Senior Executive Plan II – The WS Atkins 1997 Senior Executive Long Term Incentive Plan

(5) Awards will be granted on 30 June under the provisions of the Senior Executive Plan II based on the closing mid-market price on 27 June 2003 of81,236 shares to Stephen Billingham and 191,816 shares to Michael Jeffries.

For each share under option that had not expired at the end of the financial year, the market price at the 31 March 2003 was £1.28 and the highest and lowest market prices during the financial year were £6.22 and £0.52 respectively.

Audited informationThe emoluments and share option information disclosed on the pages 29 to 32 as required by Part 3 of Schedule 7a to the CompaniesAct has been audited.

On behalf of the Board

Struan RobertsonChairman of the Remuneration Committee

33WS Atkins plc Annual Report 2003Auditors’ report

Independent auditors’ report to themembers of WS Atkins plcWe have audited the consolidated financialstatements which comprise theconsolidated profit and loss account, the consolidated balance sheet, theconsolidated cash flow statement, theconsolidated statement of total recognisedgains and losses and the related noteswhich have been prepared under thehistoric cost convention and theaccounting policies set out in thestatement of accounting policies. We havealso audited the disclosures required byPart 3 of Schedule 7A to the CompaniesAct 1985 contained in the Remunerationreport (the auditable part).

Respective responsibilities ofdirectors and auditorsThe Directors’ responsibilities for preparingthe annual report, and the consolidatedfinancial statements in accordance withapplicable United Kingdom law andaccounting standards are set out in thestatement of Directors’ responsibilities. TheDirectors are also responsible for preparingthe Remuneration report.

Our responsibility is to audit theconsolidated financial statements and the auditable part of the Directors’remuneration report in accordance withrelevant legal and regulatory requirementsand United Kingdom Auditing Standardsissued by the Auditing Practices Board. Thisreport, including the opinion, has beenprepared for and only for the Company’smembers as a body in accordance withSection 235 of the Companies Act 1985and for no other purpose. We do not, ingiving this opinion, accept or assumeresponsibility for any other purpose or toany other person to whom this report isshown or into whose hands it may comesave where expressly agreed by our priorconsent in writing.

We report to you our opinion as to whetherthe consolidated financial statements give a true and fair view and whether theconsolidated financial statements and theauditable part of the Remuneration reporthave been properly prepared in accordancewith the Companies Act 1985. We alsoreport to you if, in our opinion, theDirectors’ report is not consistent with theconsolidated financial statements, if theCompany has not kept proper accountingrecords, if we have not received all theinformation and explanations we requirefor our audit, or if information specified by law regarding Directors’ remunerationand transactions is not disclosed.

We read the other information containedin the annual report and consider theimplications for our report if we becomeaware of any apparent misstatements or material inconsistencies with theconsolidated financial statements. Theother information comprises only theChairman’s statement, the Operatingreview, the Financial review, the Report ofthe Directors, the Corporate governancestatement and the unaudited part of theRemuneration report.

We review whether the Corporategovernance statement reflects theCompany’s compliance with the sevenprovisions of the Combined Code specifiedfor our review by the Listing Rules of theFinancial Services Authority, and we reportif it does not. We are not required toconsider whether the Board’s statementson internal control cover all risks andcontrols, or to form an opinion on theeffectiveness of the Group’s CorporateGovernance procedures or its risk andcontrol procedures.

Basis of audit opinionWe conducted our audit in accordancewith auditing standards issued by theAuditing Practices Board. An audit includesexamination, on a test basis, of evidencerelevant to the amounts and disclosures inthe financial statements and the auditable

part of the Remuneration report. It alsoincludes an assessment of the significantestimates and judgements made by theDirectors in the preparation of the financialstatements, and of whether theaccounting policies are appropriate to theCompany’s circumstances, consistentlyapplied and adequately disclosed.

We planned and performed our audit so as to obtain all the information andexplanations which we considerednecessary in order to provide us withsufficient evidence to give reasonableassurance that the consolidated financialstatements and the auditable part of theRemuneration report are free frommaterial misstatement, whether caused by fraud or other irregularity or error. Informing our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

OpinionIn our opinion:

• the consolidated financial statementsgive a true and fair view of the state ofaffairs of the Company and the Group at 31 March 2003 and of the loss andcash flows of the Group for the year then ended;

• the consolidated financial statementshave been properly prepared inaccordance with the Companies Act1985; and

• those parts of the Remuneration reportrequired by Part 3 of Schedule 7A to theCompanies Act 1985 have been properlyprepared in accordance with theCompanies Act 1985.

PricewaterhouseCoopers LLPChartered Accountants and RegisteredAuditorsLondon26 June 2003

Auditors’ report

Consolidated profit and loss accountfor the year ended 31 March 2003

34 WS Atkins plc Annual Report 2003Consolidated profit and loss account

Before Exceptional Before ExceptionalExceptional Items Exceptional Items

Items (note 3) Total Items (note 3) Total2003 2003 2003 2002 2002 2002

Notes £m £m £m £m £m £m

Turnover: Group and Share of Joint Ventures 1 1,012.2 – 1,012.2 880.9 – 880.9

Less: Share of Joint Ventures’ turnover 4 (76.9) – (76.9) (74.6) – (74.6)

Turnover 935.3 – 935.3 806.3 – 806.3 Continuing operations 908.1 – 908.1 806.3 – 806.3 Acquisitions 27.2 – 27.2 – – –Cost of sales (576.1) – (576.1) (546.1) – (546.1)

Gross profit 2 359.2 – 359.2 260.2 – 260.2Administrative expenses 2 (361.0) (48.1) (409.1) (240.2) (6.1) (246.3)

Operating (loss)/profit: Group excluding share of Joint Ventures 2 (1.8) (48.1) (49.9) 20.0 (6.1) 13.9

Continuing operations (4.1) (48.1) (52.2) 20.0 (6.1) 13.9Acquisitions 2.3 – 2.3 – – –

Operating profit: Share of Joint Ventures 4 14.2 – 14.2 14.5 – 14.5

Operating profit/(loss): Group and Share of Joint Ventures 12.4 (48.1) (35.7) 34.5 (6.1) 28.4

Interest receivable and similar income 5 6.3 – 6.3 3.6 – 3.6Operations 3.8 – 3.8 3.0 – 3.0Joint Ventures 4 2.5 – 2.5 0.6 – 0.6

Amounts written off investments – (16.4) (16.4) – – –

Interest payable and similar charges 6 (15.8) – (15.8) (11.1) – (11.1)Operations (5.8) – (5.8) (3.6) – (3.6)Joint Ventures 4 (10.0) – (10.0) (7.5) – (7.5)

Profit/(loss) on ordinary activities before taxation 2.9 (64.5) (61.6) 27.0 (6.1) 20.9

Operations (3.8) (64.5) (68.3) 19.4 (6.1) 13.3Joint Ventures 4 6.7 – 6.7 7.6 – 7.6

Taxation on profit/(loss) on ordinary activities 8 (2.1) 9.4 7.3 (11.0) 1.9 (9.1)

Operations (0.3) 9.4 9.1 (8.9) 1.9 (7.0)Joint Ventures 4 (1.8) – (1.8) (2.1) – (2.1)

Profit/(loss) on ordinary activities after taxation 0.8 (55.1) (54.3) 16.0 (4.2) 11.8

Operations (4.1) (55.1) (59.2) 10.5 (4.2) 6.3Joint Ventures 4 4.9 – 4.9 5.5 – 5.5Dividends 9 (2.8) – (2.8) (10.2) – (10.2)

Retained (loss)/profit for the year transferred to reserves 10 (2.0) (55.1) (57.1) 5.8 (4.2) 1.6

(Loss)/earnings per share 11Basic (58.7)p 13.1pFully Diluted (58.7)p 12.8pAdjusted(1) 16.5p 31.4p

Dividends per share 9 Interim – paid nil 3.78p Final – proposed 3.00p 7.56p

Total for the year 3.00p 11.34p

The notes on pages 39 to 71 form part of these financial statements.

(1) Before amortisation of goodwill and pension surplus, exceptional items, Metronet bid costs and Employee Benefit Trusts.

35WS Atkins plc Annual Report 2003Consolidated balance sheet

Consolidated balance sheetas at 31 March 2003

2003 2002Notes £m £m

Fixed assetsIntangible assets 12 49.5 72.7Tangible assets 13 65.4 74.5

Investments in Joint Ventures 4 19.5 17.4Share of gross assets 176.1 146.3Share of gross liabilities (156.6) (128.9)

Investments – own shares 14 14.7 29.0Investments – other 15 – 0.7

Investments – total 34.2 47.1

149.1 194.3

Current assetsStocks 16 0.4 0.8Debtors 17 244.2 228.8Investments 18 7.5 9.3Cash at bank and in hand 31(c) 44.8 25.8

296.9 264.7Current liabilitiesCreditors: amounts falling due within one year 19 (302.5) (276.3)

Net current liabilities (5.6) (11.6)

Total assets less current liabilities 143.5 182.7

Creditors: amounts falling due after more than one year 20 (51.1) (43.4)Provisions for liabilities and charges 21 (22.7) (23.9)

Net assets 69.7 115.4

Capital and reservesCalled up share capital 23 0.5 0.5Share premium account 24 55.4 42.1Capital redemption reserve 24 0.2 0.2Merger reserve 24 8.7 8.7Profit and loss account 24 4.9 63.9

Shareholders’ funds – equity interests 69.7 115.4

Michael JeffriesStephen Billingham

Approved by the Board on 26 June 2003.


} Directors

Consolidated cash flow statementfor the year ended 31 March 2003

36 WS Atkins plc Annual Report 2003Consolidated cash flow statement

2003 2002Notes £m £m

Net cash inflow from operating activities 31(b) 26.6 20.3

Dividends received from Joint Ventures and Associates 6.5 0.8

Returns on investments and servicing of financeInterest received 3.3 3.0

– current asset liquid investments and other 2.6 2.4– finance leases 0.7 0.6

Interest paid (5.5) (3.4)– bank loans, overdrafts and other (5.0) (3.0)– finance leases (0.5) (0.4)

(2.2) (0.4)

Taxation 31(d) (1.8) (11.0)

Capital expenditure and financial investmentPurchases less disposals of fixed assets (17.7) (52.2)Purchases of own shares by Employee Benefit Trusts (2.6) (18.4)Disposal of other fixed asset investment 1.2 – Sales of own shares by Employee Benefit Trusts 0.1 3.3Sale of non-liquid current asset investment 0.2 0.7

(18.8) (66.6)

Acquisitions and disposalsPurchases of fixed asset investments – Joint Ventures (3.3) (2.5)Subsidiary undertakings acquired:

Hanscomb – cash consideration including expenses 32 (6.6) –– cash acquired 1.6 –

Prior year acquisitions (1.1) (7.1)

(9.4) (9.6)

Equity dividends paid (6.6) (8.9)

Cash outflow before use of liquid resources and financing (5.7) (75.4)

Management of liquid resourcesDecrease in current asset investments 1.7 7.8

FinancingCash inflow from short-term loans 33.0 12.3Redemption of loan stock (0.8) (0.4)Cash inflow from long-term loans 4.6 3.4Capital element of finance lease rental payments (2.7) (2.9)Shares issued 0.2 0.1

34.3 12.5

Increase/(decrease) in cash 30.3 (55.1)


37WS Atkins plc Annual Report 2003Statement of total recognised gains and lossesReconciliation of movements in shareholders’ funds

Consolidated statement of totalrecognised gains and lossesfor the year ended 31 March 2003

2003 2002Notes £m £m

(Loss)/profit for the financial yearOperations (59.2) 6.3Joint Ventures 4.9 5.5

(54.3) 11.8

Differences on exchange 24 (1.9) (0.5)

Total gains and losses recognised in the year (56.2) 11.3

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

Reconciliation of movements in shareholders’ fundsfor the year ended 31 March 2003

2003 2002Notes £m £m

(Loss)/profit for the financial yearOperations (59.2) 6.3Joint Ventures 4.9 5.5

(54.3) 11.8

Dividends 9 (2.8) (10.2)

(57.1) 1.6

Differences on exchange 24 (1.9) (0.5)Issue of new shares 13.3 1.1

Net (reduction in)/additions to shareholders’ funds (45.7) 2.2

Opening shareholders’ funds 115.4 113.2

Closing shareholders’ funds 69.7 115.4

Parent company balance sheetas at 31 March 2003

38 WS Atkins plc Annual Report 2003Parent company balance sheet

2003 2002Notes £m £m

Fixed assetsInvestments 15 58.5 61.3

Current assetsDebtors 17 24.8 14.8

Current liabilitiesCreditors: amounts falling due within one year 19 (13.2) (16.3)

Net current assets/(liabilities) 11.6 (1.5)

Total assets less current liabilities 70.1 59.8

Capital and reservesCalled up share capital 23 0.5 0.5Share premium account 24 55.4 42.1Capital redemption reserve 24 0.2 0.2Merger reserve 24 8.7 8.7Profit and loss account 24 5.3 8.3

Shareholders’ funds – equity interests 70.1 59.8

Michael JeffriesStephen Billingham

Approved by the Board on 26 June 2003.


} Directors

39WS Atkins plc Annual Report 2003Notes to the financial statements

Notes to the financial statements

Accounting policiesThe Group financial statements are prepared in accordance with applicable United Kingdom Accounting Standards. A summary of themore important Group accounting policies which have been applied consistently, is given below.

Basis of accountingThe Financial Statements have been prepared under the historical cost convention, as modified by the valuation of current assetinvestments set out in Note 18.

The preparation of the Group’s financial statements in conformity with UK Generally Accepted Accounting Principles requires the Board to make certain estimates and assumptions. These affect the reported amount of assets and liabilities, the disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the period.

Significant elements of those estimates in these financial statements include allowances for estimated contract revenue and relatedcosts. These are explained in the policy note Contract accounting and stocks. The Board considers that the Group is prudent in itsvaluation of contracts, particularly for large contracts lasting several years, which may have a wide range of potential outcomes.

Other significant elements of those estimates include asset recognition of pre-contract bid costs on Private Finance Initiative bids, self-insured liabilities, pension costs on defined benefit schemes, taxation provisions and Transfer of Undertaking Protection ofEmployment (‘TUPE’) potential liabilities. The Board has continued to review judicial clarifications of the interpretation of the Transfer of Undertakings (Protection of Employment) Regulations 1981. It continues to monitor developments in this area and is activelymanaging the risks involved. The Board considers the current level of the Group’s provisioning to be adequate.

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

UITF Abstract 13 seeks to clarify certain issues relating to ESOP trusts in the light of the principles established by FRS 5, which requires a reporting entity’s financial statements to reflect the substance of the transactions into which it has entered. Accordingly, in compliancewith UITF 13, the Employee Benefit Trusts have been incorporated in these financial statements as detailed in Note 25. The Directorshave not disclosed details of the International Sharesave 25 Scheme, as permitted by UITF 17.

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 annual instalmentsover its expected useful life. The useful life is not normally expected to exceed 10 years. Provision is made for permanent impairment.

Joint VenturesIn accordance with FRS9 Associates and Joint Ventures, the Group accounts for Joint Ventures under the gross equity method ofaccounting. 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 Joint Venture suchthat the Group’s ability to exercise significant influence is removed, the carrying amount at the date of the event is reported as aninvestment 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 Joint Ventures do notadopt Group accounting policies, their reported results are restated to comply with Group accounting policies. Where Joint Ventures donot adopt accounting periods that are co-terminus with the Group’s results, results and net assets are based upon accounts drawn up tothe Group’s accounting reference date.

TurnoverGroup turnover from long term contracts comprises the value of work performed during the year by reference to total sales value 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 from third party sub-contractors and recharge them on to the customer at cost. The amounts charged by sub-contractors and recharged tocustomers are excluded from turnover and cost of sales. Debtors, creditors and cash relating to these transactions are included in theGroup balance sheet.

40 WS Atkins plc Annual Report 2003Notes to the financial statements

Notes to the financial statements continued

Contract accounting and stocksThe value of contract work in progress comprises the costs incurred on contracts plus an appropriate proportion of overheads andattributable profit. Profit is recognised on a percentage of completion basis when the outcome can be reasonably foreseen but not until the contract is at least 50% complete. Otherwise, profits are taken on completion. Provision is made in full for estimated losses to completion.

Fees invoiced on account are deducted from the value of work in progress and the balance is separately disclosed in debtors as amountsrecoverable on contracts, unless such fees exceed the value of the work in progress on any contract when the excess is separatelydisclosed 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 thecosts of obligations in relation to the non-renewal or termination of a contract are higher in the final year of the contract 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 contract periodexceed 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. Costs incurred before it is virtually certain that a contract willbe obtained are charged to expenses. Directly attributable costs incurred after that point (offset by any bid recovery fees received onaward of the contract) are recognised in the balance sheet and charged to profit and loss over the same period as the Group’s interest in any Special Purpose Company charges the equivalent capitalised cost to profit and loss.

Any other bid recovery fees are credited to profit and loss over the same period as the Group’s interest in any Special Purpose Companycharges the equivalent capitalised cost to profit and loss.

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

Goodwill 10 yearsPatents (over equipment) 3 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 and assets in the course of construction.

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 new systems(including major enhancements) from the point of inception to the point of satisfactory completion. Costs include costs of own labour.Maintenance and minor modifications are expensed to profit and loss as incurred.

Fixed asset investmentsFixed asset investments include ordinary shares of the Company, some of which are held for options and other incentives. Where theoption or incentive price is below book value, the difference is charged as an operating cost over the period of the option. Provision ismade for permanent impairment.

Current asset investmentsCurrent asset investments include UK government securities and short-term deposits and are shown at market value.


Lease obligationsOn the inception of finance leases the asset is capitalised and a liability recognised for the present value of the minimum lease payments.Assets are depreciated over the remaining contract term. Rentals are apportioned between capital and interest expense to achieve a constant rate of charge on the outstanding obligation. The costs of operating leases are charged to profit and 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 a third party,that lease is treated as a finance lease. All other lease arrangements are treated as operating leases. Debtors under finance leasesrepresent 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 net cash investments. Rental incomefrom 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 actuarial advice, of the pensionable salaries of employees. The cost of providing pensions and any variations from the regular cost, arising from actuarialvaluations, is charged or credited to the profit and loss account on a systematic basis over the expected average remaining service lives of the members of each scheme. The pension cost is assessed in accordance with the advice of qualified actuaries.

The difference between the charge for pensions and the total contributions actually paid is included within provisions for liabilities 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 date where the transactions or events that give rise to an obligation to pay more or less tax in the future have occurred by the balance sheet 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 ismeasured 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 are recordedat cost and are then revalued to market rates at each balance sheet date. Gains and losses are deferred and taken to profit and loss tomatch the maturity of the underlying transactions. Gains and losses on those contracts which are no longer designated as hedges aretaken 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 foreign currencydenominated assets and liabilities are translated at closing rates of exchange. Gains and losses are taken to the profit and loss account,except that exchange differences on foreign currency borrowings to finance foreign currency net investments are taken to the statementof total recognised gains and losses.

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

US borrowings are used to hedge against the Group investment in the US. The net exchange differences are taken to reserves. Forwardforeign exchange contracts are carried on the balance sheet at fair value (‘marked to market’) with changes in the value recognised inearnings for the period.

Employee Benefit TrustsThe cost of shares is amortised on a straight line basis down to the exercise price of each incentive scheme over the period to initialexercise date. Cumulative amortisation relating to options which have lapsed in year is written back to profit and loss. Provision is madefor impairment where the Group considers there has been a permanent diminution in value.

The shares held for the Geared Option Scheme are carried at cost except where the Group considers there has been a permanentdiminution in value.



1 Segmental analysisContinuing Total TotalOperations Acquisitions 2003 2002

£m £m £m £m

A. TurnoverGeographic area by location of operationsUnited Kingdom 742.7 – 742.7 628.9Overseas 165.4 27.2 192.6 177.4Other European countries 40.5 6.0 46.5 34.3Middle East 16.4 – 16.4 13.6Asia/Pacific 30.8 – 30.8 35.1North America 77.7 21.2 98.9 94.4

Total before Joint Ventures 908.1 27.2 935.3 806.3Joint Ventures 76.9 – 76.9 74.6United Kingdom 24.6 – 24.6 22.3Overseas 52.3 – 52.3 52.3

985.0 27.2 1,012.2 880.9

By class of businessTransport 312.0 – 312.0 237.8Design and Government Services 195.9 – 195.9 177.9Industry 116.4 – 116.4 93.7Commercial Services 118.4 – 118.4 119.5International 165.4 27.2 192.6 177.4

Total before Joint Ventures 908.1 27.2 935.3 806.3

There was no material difference between geographic turnover by location of operation and by location of customer. Turnover excludes recharges of £186.2m (2002: £129.5m) where under certain services contracts the Group managescustomer expenditure and is obliged to purchase goods and services from third party sub-contractors and recharge them to the customer at cost.


1 Segmental analysis (continued)Operating (loss)/profit Net assets/(liabilities)

2003 2002 2003 2002(1)

£m £m £m £m

B. Operating (loss)/profit and net assetsGeographic area by location of operationsUnited Kingdom (3.1) 14.5 (16.2) 27.3Continuing operations (1.2) 18.1 (42.2) (28.4)Amortisation of goodwill/unamortised goodwill (5.5) (5.5) 25.0 40.0Amortisation of pension surplus 3.7 3.4 – –Contribution to Employee Benefit Trusts (2.5) (1.9) – –Employee Benefit Trusts after contribution 2.4 0.4 1.0 15.7

Overseas 1.3 5.5 66.4 70.7Other European Countries– continuing operations 1.5 1.7 13.1 12.2– amortisation of goodwill/unamortised goodwill (0.7) (0.6) 5.9 6.0– acquisitions 0.1 – (0.4) –– amortisation of goodwill on acquisitions/

unamortised goodwill on acquisitions (0.1) – – –Middle East 1.4 1.4 6.3 5.2Asia/Pacific 0.2 1.5 7.7 7.9North America – continuing operations 1.4 4.8 11.5 12.7– amortisation of goodwill/unamortised goodwill (3.4) (3.3) – 26.7– acquisitions 2.3 – 3.7 –– amortisation of goodwill on acquisitions/

unamortised goodwill on acquisitions (1.4) – 18.6 –

Total before Joint Ventures and exceptional items (1.8) 20.0 50.2 98.0Joint Ventures 14.2 14.5 19.5 17.4United Kingdom 10.6 10.5 15.1 14.2Overseas 3.6 4.0 4.4 3.2

Total before exceptional items 12.4 34.5 69.7 115.4Exceptional items (48.1) (6.1) – –

(35.7) 28.4 69.7 115.4

(1) Comparatives have been restated to ensure comparability with the current year and primarily relate to the allocation of goodwill.



1 Segmental analysis (continued)Operating (loss)/profit Net assets/(liabilities)

2003 2002 2003 2002(1)

£m £m £m £m

B. Operating (loss)/profit and net assets (continued)By class of businessProfit before items below/

Net assets before unamortised goodwill 18.8 36.4 48.7 74.3Transport 9.2 14.8 (17.6) (12.5)Design & Government Services (1.5) 0.5 22.9 41.4Industry (0.3) 3.8 5.2 (5.5)Commercial Services 4.5 7.9 (2.3) 11.6International 6.9 9.4 40.5 39.3

Bid costs (13.1) (8.9) – –Amortisation of goodwill/unamortised goodwill (11.1) (9.4) 49.4 72.7Amortisation of pension surplus 3.7 3.4 – –Contribution to Employee Benefit Trusts (2.5) (1.9) – –Employee Benefit Trusts 2.4 0.4 1.0 15.7Corporate net liabilities – – (48.9) (64.7)

Total before Joint Ventures and exceptional items (1.8) 20.0 50.2 98.0Joint Ventures 14.2 14.5 19.5 17.4Exceptional items (48.1) (6.1) – –

(35.7) 28.4 69.7 115.4

Corporate net liabilities comprise(2):Fixed assets 59.7 58.4Fixed asset investments – 0.7Net cash balances (71.9) (57.3)Trade creditors (24.5) (39.2)Deferred tax 17.3 9.2 Corporation tax (2.0) (4.4)Proposed dividends (2.8) (7.0)Provisions for liabilities and charges (22.7) (23.9)Other (2.0) (1.2)

(48.9) (64.7)

(1) Comparatives have been restated to ensure comparability with the current year.(2) Following the reorganisation in 2002, responsibility for the majority of the UK fixed assets and trade creditors has been centralised.

As a result of this change in practise these assets and liabilities are no longer accounted for in business segments.

C. Operating marginsOperating margins2003 2002

By class of businessTransport 2.9% 6.2%Design and Government Services (0.8)% 0.3%Industry (0.3)% 4.1%Commercial Services 3.8% 6.6%International 3.6% 5.3%

Total 2.0% 4.5%

Operating margins exclude amortisation of goodwill and pension surplus, bid costs, exceptional items, Employee Benefit Trusts and share of Joint Ventures.


2 Operating profit

2003 2002£m £m

Turnover 935.3 806.3Cost of sales (576.1) (546.1)Project expenses(1) (250.2) (206.5)Other direct costs (mainly labour) (325.9) (339.6)

Gross profit 359.2 260.2Administrative costs (409.1) (246.3)Selling costs (34.1) (34.2)Administrative expenses excluding selling costs (326.9) (206.0)Exceptional administrative expenses (48.1) (6.1)

Operating profit (49.9) 13.9

Amounts relating to acquisitions in the above are £14.8m for cost of sales and £10.1m for administrative expenses.

Operating profit is arrived at after charging/(crediting):Depreciation of tangible fixed assets:

owned – exceptional write downs 1.8 2.9 owned 20.6 11.5 leased 1.6 2.7

Loss/(profit) on sale of tangible fixed assets 0.4 (0.3)Profit on disposal of current asset liquid investments – (0.1)Profit on disposal of current asset non-liquid investments (0.1) (0.7)Loss on sale of fixed asset investments – own shares 0.3 – Amortisation of goodwill 11.1 9.4 Impairment of goodwill 30.7 – Amortisation of shares held by Employee Benefit Trusts 0.1 1.7 Payments under operating leases:

land and buildings 18.7 18.5 plant, machinery and vehicles 7.4 7.3

Amounts payable to auditors: PricewaterhouseCoopers LLPaudit services(2) – for current year 1.03 0.79 non-audit services – taxation services 0.71 0.55

– financial and other advisory services 1.30 0.10 Audit services from other auditors – 0.01

(1) Project expenses represent project related costs including sub-contractor costs but excluding direct labour costs.(2) Includes £50,000 audit fee for the holding company (2002: £50,000).



3 Exceptional items2003 2002

£m £m

OperatingRedundancy and other restructuring costs 14.8 3.2Accelerated depreciation – 2.9

14.8 6.1Impairment of tangible fixed assets (Note 12) 1.8 –Impairment of current assets (Note 12) 0.8 –

Total before impairment of goodwill 17.4 6.1Impairment of goodwill (Note 12) 30.7 –

Total after impairment of goodwill 48.1 6.1

Non-operatingAmounts written off investments 16.4 –

At the time of the Interim Statement the Group announced a major restructuring programme in order to significantly reduce costs and protect future profitability. A charge of £14.8m (cash outflow £11.7m) has been made in the year ended 31 March 2003 which includes a provision for vacant property resulting from the restructuring programme.

The provision for impairment of goodwill and other assets is a result of an impairment review as detailed in Note 12.

Restructuring costs in 2002 of £6.1m (cash outflow £3.2m) consisted mainly of staff redundancy, accelerated depreciation of redundant fixed assets and the establishment of the Shared Service Facility.

The carrying value of the shares held in Employee Benefit Trusts was reviewed in the light of the issues affecting the Companyand the consequent impact on the Company’s share price. At 30 September 2002 a provision of £16.4m was made, whichremained in place as at 31 March 2003.

4 Joint Ventures2003 2002

£m £m

Income from interests in Joint VenturesTurnover 76.9 74.6

Operating profit before impairment 14.6 14.5Impairment of investment (0.4) –

Share of operating profit in Joint Ventures 14.2 14.5Interest receivable by Joint Ventures 2.5 0.6Interest payable by Joint Ventures (10.0) (7.5)

Share of profit on ordinary activities before taxation 6.7 7.6Taxation on profit on ordinary activities (1.8) (2.1)

Share of profit on ordinary activities after taxation 4.9 5.5

Share of net assets of Joint VenturesIntangible assets – Goodwill 0.5 0.6Tangible fixed assets 126.5 104.0Current assets 49.1 41.7

176.1 146.3

Liabilities due within one year (22.0) (21.9)Liabilities due after one year (134.6) (107.0)

(156.6) (128.9)

19.5 17.4


4 Joint Ventures (continued)2003 2002

£m £m

Group turnover with Joint Ventures 7.5 10.4

Included in liabilities due within one year are:– Trading balances with WS Atkins 0.2 –

Included in liabilities due after more than one year are:– Subordinated debt with WS Atkins 10.1 3.1

Loan balancesLoan drawn as

at 31 March RepaymentFacility 2003 period

Joint Venture £m £m years

Connect Roads Limited 155.6 155.6 11South Manchester Healthcare (Holdings) Ltd 83.4 78.3 21Mercia Healthcare (Holdings) Limited 67.8 64.3 25New Schools (Penweddig) Holdings Limited 11.0 10.1 28New Schools (Leyton) Holdings Limited 14.0 13.3 24New Schools (Cornwall) Holdings Limited 38.2 30.7 23New Schools (Swanscombe) Holdings Limited 13.2 12.4 23New Schools (Merton) Holdings Limited 52.6 17.9 23Total Solutions for Industry Limited 4.8 4.7 15Total Solutions for Industry Limited 6.2 5.2 4

Total 446.8 392.5

The Group has not guaranteed any of the above loans.

2003 2002£m £m

Group share of capital commitmentsCapital commitments 3.8 18.8

5 Interest receivable and similar income2003 2002

£m £m

Interest receivable – short-term 1.7 1.8Income from fixed asset investment 0.1 0.1Income from current asset liquid investments 0.6 0.9Income from finance leases 0.7 –Profit on sale of fixed asset investment 0.6 –

3.7 2.8Employee Benefit Trusts 0.1 0.2

3.8 3.0Joint Ventures 2.5 0.6

6.3 3.6



6 Interest payable and similar charges2003 2002

£m £m

Interest payable on loans and other borrowings wholly repayable within five years:Bank loans and overdrafts (secured) 4.9 3.0Hire purchase and finance leases 0.5 0.4Other 0.4 0.2

5.8 3.6Joint Ventures 10.0 7.5

15.8 11.1

7 Staff numbers and costs2003 2002

No. No.

Number of persons (including Executive Directors) employed by the Group as at 31 March 2003:By class of business:Transport 4,155 4,408Design and Government Services 4,416 4,578Commercial Services 2,267 2,286Industry 1,123 1,042International 3,310 2,629Corporate 121 216

15,392 15,159

Those persons were based as follows:UK 12,082 12,530Non – UK 3,310 2,629Other European countries 1,060 691Middle East 516 498Asia Pacific 616 556North America 1,118 884

15,392 15,159

Average number of persons (including Executive Directors) employed by the Group during the year:By class of business:Transport 4,308 3,880Design and Government Services 4,521 4,367Commercial Services 2,300 2,312Industry 1,102 851International 3,032 2,567Corporate 187 228

15,450 14,205

Those persons were based as follows:UK 12,418 11,638Non – UK 3,032 2,567

15,450 14,205

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

Salaries 413.4 342.0Profit share and performance-related bonus 12.1 12.8Social security costs 32.9 29.7Other pension costs 18.0 16.6

476.4 401.1

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


8 Taxation on profit/(loss) on ordinary activities2003 2002

£m £m

UK corporation tax at 30% (1.1) 4.4Relief for overseas taxation (0.4) (0.4)Adjustment in respect of prior years (1.5) (0.5)

(3.0) 3.5Overseas tax 1.9 1.3

(1.1) 4.8Joint Ventures 1.8 2.1

Total current tax 0.7 6.9Deferred tax – current year losses (7.3) –

– other (0.7) 2.2

Total tax (credit)/charge (7.3) 9.1

The tax charge as adjusted profit on ordinary activities is £3.5m (2002: £9.7m), an effective tax rate of £18.5% (2002: 25.5%).Adjusted profit is profit before exceptional items, amortisation of pension surplus and goodwill, Metronet bid costs andEmployee Benefit Trusts. The variation between this rate and the UK corporation tax rate is explained as follows:

% %

UK corporation tax rate 30.0 30.0Effect of:Pension credit (3.6) (1.5)Accelerated capital allowances 4.9 (4.2)Overseas timing differences (1.0) (2.3)Other timing differences (3.7) 2.8Permanent differences 3.0 2.4Other differences (0.3) (1.5)Non – UK activities 2.5 –

Sub total 31.8 25.7Adjustment in respect of prior years (3.2) (3.4)

Total current tax based on adjusted profit 28.6 22.3Movement in deferred tax (10.1) 3.2

Total tax based on adjusted profit 18.5 25.5

Explanation of current tax based on profit on ordinary activities:UK corporation tax rate 30.0 30.0Effect on current tax of goodwill amortisation and impairment (20.7) 13.5Effect on current tax of EBTs – (0.7)Permanent differences (0.9) 8.9Timing differences (11.5) (14.3)Adjustment in respect of prior years 2.4 (2.5)Other differences 0.8 (2.0)

Total current tax based on profit on ordinary activities 0.1 32.9

Excess 2003 tax losses are carried forwards as a deferred tax asset.

To the extent that dividends remitted from overseas subsidiaries and associated undertakings are expected to result inadditional taxes, appropriate amounts have been provided. No taxes have been provided for unremitted earnings of Groupcompanies overseas, as these are, in the main, considered permanently employed in the business of these companies.Unremitted earnings may be liable to overseas taxes and/or UK taxation (after allowing for double taxation relief) if they were to be distributed as dividends.



9 Dividends2003 2002

£m £m

Interim paid – Nil per share (2002: 3.78p) – 3.3Final proposed – 3p per share payable 1 October 2003 (2002: 7.56p) 2.8 6.9

Dividends 2.8 10.2

Dividends amounting to £0.2m (2002:£0.6m) in respect of the Company’s shares held by the EBTs have been deducted inarriving at the aggregate of dividends paid and proposed.

10 Retained profit2003 2002

£m £m

Retained (loss)/profit for the year has been dealt with in the Financial Statements as follows:Parent Company (3.0) 4.1Subsidiary undertakings (45.1) (8.6)Joint Ventures (Note 4) 4.9 5.5Employee Benefit Trusts (Note 25) (13.9) 0.6

Retained (loss)/profit for the year (57.1) 1.6

11 (Loss)/earnings per shareBasic earnings per share are calculated in accordance with FRS 14 Earnings per share, by dividing loss after tax of £54.3m(2002: profit of £11.8m) by the weighted average number of shares in issue during the period of 92,486,187 (2002:90,537,512), excluding 6,433,843 shares held by the Employee Benefit Trusts (EBTs) which have not unconditionally vested 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 93,048,051 (2002: 92,398,113). The options relate to the SAYE schemes which mature between April 2003 and March 2006, to the Equity Participation Plans and Long Term Incentive Plans, and to “incentive-to-sell” option schemesfor employees of Atkins Americas Inc. In accordance with FRS14, there is deemed to be no diluting effect of potential ordinaryshares where there is a basic loss per ordinary share.

The Adjusted earnings per share information has been calculated based on an adjusted profit after tax of £15.2m (2002: £28.4m). Adjusted profit is before Metronet bid costs, amortisation of pension surplus and goodwill, exceptional itemsand Employee Benefit Trusts. The Board believes that this additional measure provides a better indicator of the underlyingtrends in the business.

2003 2002

(Loss)/profit after taxation £(54.3)m £11.8mAverage shares (‘000) 92,486 90,537

Fully diluted earnings per share (58.7)p 12.8pBasic earnings per share (58.7)p 13.1p

Adjustments after accounting for tax –Amortisation of goodwill 12.0p 10.4pEBT – contributions 2.7p 1.3pEBT – amounts written off investments 12.4p nilpEBT – amortisation/other (2.7)p (0.7)pAmortisation of pension surplus (2.8)p (4.9)pMetronet bid costs 6.4p 5.5pExceptional items 47.2p 6.7p

Adjusted earnings per share 16.5p 31.4pFully diluted adjusted earnings per share 16.3p 30.7p


12 Intangible fixed assets2003 2002

£m £m

GoodwillCost at 1 April 96.4 89.6Acquisition of Hanscomb 20.3 –Acquisition of ScanRail – 5.3Acquisition of Boward – 1.4Difference on exchange (2.2) 0.1

Cost at 31 March 114.5 96.4

Amortisation at 1 April 23.7 14.3Difference on exchange (0.5) –Amortisation charge for the year 11.1 9.4Impairment provision 30.7 –

Amortisation at 31 March 65.0 23.7

Net Book Value at 31 March 49.5 72.7

In accordance with FRS11 Impairment of fixed assets and goodwill, the carrying value of the Group’s acquired subsidiaries has been compared to their recoverable amounts, represented by their value in use to the Group. The value in use has beenderived from discounted cashflow projections using discount rates of 3% to 6%. The review has resulted in an impairmentcharge of £30.7m (2002: nil) to goodwill, largely relating to the North American business. In addition a further £1.8m chargewas made to tangible fixed assets and £0.8m to net current assets.

13 Tangible fixed assetsShort-term Plant,

Freehold leasehold machineryproperty property & vehicles Total

£m £m £m £m

Cost at 1 April 2002 9.6 2.5 113.0 125.1New subsidiary undertakings – 0.4 0.2 0.6Additions – 6.7 13.3 20.0Disposals – (0.4) (9.6) (10.0)Differences on exchange – (0.2) (1.6) (1.8)

Cost at 31 March 2003 9.6 9.0 115.3 133.9

Depreciation at 1 April 2002 5.3 1.7 43.6 50.6Disposals – (0.4) (4.4) (4.8)Depreciation charge for the year 0.7 0.5 21.0 22.2Impairment charge for the year (note 12) – 0.3 1.5 1.8Differences on exchange – (0.1) (1.2) (1.3)

Depreciation at 31 March 2003 6.0 2.0 60.5 68.5

Net Book Value at 31 March 2003 3.6 7.0 54.8 65.4

Net Book Value at 31 March 2002 4.3 0.8 69.4 74.5

No depreciation has been provided on freehold land.



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

2003 2002£m £m

Cost 9.9 12.5Depreciation (3.2) (6.4)

Net Book Value 6.7 6.1

Additions to fixed assets funded by finance leases were £3.5m.

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

2003 2002£m £m

Cost 5.4 8.6Depreciation (1.5) (0.9)

Net Book Value 3.9 7.7

Rents receivable from operating leases of £0.5m (2002: £0.4m) are included in turnover.

14 Fixed assets – Investment in own shares2003 2002

£m £m

CostAt 1 April 35.8 24.7Additions 2.6 18.4Disposals (2.2) (7.3)

At 31 March 36.2 35.8

AmortisationAt 1 April 6.8 8.6Charge for year 0.1 2.3Impairment provision 16.4 –Disposals (1.8) (4.1)

At 31 March 21.5 6.8

Net Book Value at 31 March 14.7 29.0

At 31 March 2003, the Employee Benefit Trusts (EBTs) owned 6,628,437 (2002: 6,765,542) ordinary shares of the Companybeing 6.6% (2002: 7.0%) of the Company’s entire issued share capital. These ordinary shares have been acquired by the EBTs for the subsequent transfer to employees and are substantially reserved to meet commitments under the employeeincentive schemes. The EBTs have waived their rights to dividends on these shares.

The carrying value of the shares was reviewed in the light of the issues affecting the Company and the consequent impact on the Company’s share price. At 30 September 2002 a provision for permanent diminution in value of £16.4m was made.


15 Fixed assets – Unlisted investmentsOther

participatingAssociates interests Total

£m £m £m

GroupCost at 1 April 2002 0.3 0.6 0.9Disposals – (0.6) (0.6)

Cost at 31 March 2003 0.3 – 0.3

Provisions at 1 April 2002 (0.2) – (0.2)Charge in year (0.1) – (0.1)

Provisions at 31 March 2003 (0.3) – (0.3)

Net Book Value at 31 March 2003 – – –

Net Book Value at 31 March 2002 0.1 0.6 0.7

The disposal during the year relates to the Group’s interest in Bridgend Custodial Services Ltd.

JointVentures and

Subsidiaries associates Total£m £m £m

CompanyCost of shares at 1 April 2002 53.1 8.4 61.5Additions 19.1 – 19.1

Cost of shares at 31 March 2003 72.2 8.4 80.6

Provisions at 1 April 2002 – 0.2 0.2Charge in year 21.9 – 21.9

Provisions at 31 March 2003 21.9 0.2 22.1

Net Book Value at 31 March 2003 50.3 8.2 58.5

Net Book Value at 1 April 2002 53.1 8.2 61.3

Details of principal subsidiary undertakings are set out in Note 33.

16 StocksGroup

2003 2002£m £m

Stocks of raw materials and consumables 0.4 0.8



17 DebtorsGroup Company

2003 2002 2003 2002£m £m £m £m

Amounts due within one year:Trade debtors 185.5 131.6 – –Amounts recoverable on contracts 13.4 63.1 – –Deferred tax (Note 22) 12.1 9.2 – –Finance lease debtor 0.3 – – –Other debtors 10.5 8.9 – –Other prepayments and accrued income 14.1 15.9 – –Dividends receivable – 0.1 24.8 14.8

235.9 228.8 24.8 14.8Amounts due after more than one year:Deferred tax (Note 22) 5.2 – – –Finance lease debtor 3.1 – – –

Total debtors 244.2 228.8 24.8 14.8

18 Current asset investmentsGroup

2003 2002£m £m

Short term deposits and marketable securities 6.5 8.1Certificates of tax deposit 0.4 0.4Liquid investments 6.9 8.5Land 0.6 0.8

7.5 9.3

Current asset liquid investments are shown at market value, which is £52,000 above historic cost (2002: £21,000 belowhistoric cost).

Certificates of tax deposit consisted of £0.4m in respect of Employee Benefit Trusts (2002: £0.4m).

19 Creditors: amounts falling due within one yearGroup Company

2003 2002 2003 2002£m £m £m £m

Loan notes 0.9 1.7 0.9 1.7Bank loan (secured) 47.9 14.9 – –Bank overdrafts (secured) 2.2 14.6 – –Fees invoiced in advance 70.7 70.7 – –Trade creditors 35.0 46.4 – –Amounts due to sub-contractors (Note 31 c) 23.0 16.5 – –Amounts due to subsidiary undertakings – – 9.5 7.7UK corporation tax 2.0 4.4 – –Social security and other taxation 36.0 20.9 – –Dividend payable 2.8 6.9 2.8 6.9Hire purchase and finance leases 2.1 2.2 – –Deferred consideration on acquisitions (see below) 0.9 1.3 – –Deferred PFI bid cost recovery 0.2 0.1 – –Accruals and deferred income 66.7 63.1 – –Other creditors 12.1 12.6 – –

302.5 276.3 13.2 16.3

Total deferred consideration amounted to £2.0m of which £0.9m falls due within one year and £1.1m falls due after morethan one year (Note 20). Of the total deferred consideration, £0.2m relates to the final instalment for the acquisition of Atkins Americas Inc., formerly Benham, which was settled in April 2003. The remaining £1.8m relates to the acquisition ofHanscomb (£2.3m at acquisition (Note 32) less utilisation of £0.5m (Note 25)).

Of the trade creditors and accruals above, £0.2m relates to the purchase of fixed assets (2002: £2.9m).


20 Creditors: amounts falling due after more than one yearGroup

2003 2002£m £m

Bank loan repayable between two and five years (secured) 39.6 34.4Hire purchase and finance leases:

Repayable between one and two years 1.6 1.4Repayable between two and five years 2.5 2.2Repayable after more than five years 0.7 0.2

Deferred consideration (Note 19) 1.1 0.2Deferred bid cost recovery fees 5.6 5.0

51.1 43.4

The Company had no creditors falling due after more than one year.

21 Provisions for liabilities and chargesEx Director’s

unfundedVacant pension

property Pensions promise Total£m £m £m £m

Balance at 1 April 2002 – 23.5 0.4 23.9Charged/(credited) to profit and loss account 4.8 10.5 (0.2) 15.1Pensions contributions/provisions utilised – (16.3) – (16.3)

Balance at 31 March 2003 4.8 17.7 0.2 22.7

The pension provision represents the excess of accumulated costs over the amount funded. The ex Director’s unfundedpension promise provision was reduced in the year as it was no longer salary related (Note 30).

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

22 Deferred taxation2003 2002

£m £m

Amounts due within one year:Accelerated depreciation – 0.7Employee Benefit Trusts 0.8 (2.7)Overseas 1.8 1.9Pension accrual 1.8 7.2UITF 34 adjustment – 1.0Tax losses 7.3 –Other timing differences 0.4 1.1

12.1 9.2

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

5.2 –

Total deferred taxation 17.3 9.2



23 Share capitalGroup and Company

No. of shares £m

AuthorisedAuthorised at 1 April 2002 and 31 March 2003 ordinary shares of 0.5p 150,000,000 0.8

Issued and fully paidIssued and fully paid at 1 April 2002 96,510,192 0.5Issue of new shares in respect of:

acquisition of Hanscomb 3,039,617QUEST 79,238scrip dividend 94,975

Issued and fully paid at 31 March 2003 99,724,022 0.5

As at the 31 March 2003 there were 6,628,437 (2002: 6,765,542) ordinary shares held by the Employee Benefit Trusts ofwhich 3,423,876 (2002: 3,990,174) were being held for transfer to Directors and employees, some of which are contingenton future earnings per share performance conditions, under the following share incentive schemes:

Normal exercisable/ Number ofDate award Exercise price transferable period awards

Name of Scheme granted per share of the award outstanding

WS Atkins 1997 Senior Executive 15/06/98 0.0p 15/06/01-15/06/06 20,056Long Term Incentive Plan 18/07/01 0.0p 18/07/04-18/07/08 83,001

21/09/01 0.0p 21/09/01-21/09/08 53,93230/11/01 0.0p 30/11/04-30/11/11 75,144

WS Atkins 1997 Executive Long Term Incentive Plan 15/06/98 0.0p 15/06/01-15/06/06 73,91130/11/01 0.0p 30/11/04-30/11/11 18,72229/07/02 0.0p 29/07/05-29/07/12 50,924

Lambert Smith Hampton Executive Option Scheme 03/06/99 399.0p 03/06/04-03/06/06 3,73616/06/99 399.0p 01/02/04-16/06/06 13,32616/06/99 399.0p 16/06/04-16/06/06 3,736

WS Atkins Geared Option Scheme 28/09/01 724.9p 28/09/04-28/09/11 44,18231/12/01 724.9p 31/12/04-31/12/11 42,90331/01/02 724.9p 31/01/05-31/01/12 34,783

WS Atkins Pre Tax Equity Participation Plan 01/08/97 0.0p 01/08/00-01/08/04 47,30116/03/98 0.0p 16/03/01-16/03/05 30,80022/07/98 0.0p 22/07/01-22/07/05 34,41722/07/99 0.0p 22/07/02-22/07/06 46,33511/01/00 0.0p 11/01/03-11/08/07 4,52820/07/00 0.0p 20/07/03-20/07/07 55,33918/07/01 0.0p 18/07/04-18/07/08 117,325

WS Atkins Post Tax Equity Participation Plan 01/08/97 0.0p 01/08/00-01/08/04 5,05922/07/98 0.0p 22/07/01-22/07/05 1,54618/07/01 0.0p 18/07/04-18/07/08 1,436


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 Deferred Bonus Share Option Plan 23/12/99 0.0p 23/12/04-23/12/09 17,60018/02/00 0.0p 18/02/03-18/02/10 20,25912/06/00 0.0p 12/06/03-12/06/10 24,45804/12/00 0.0p 04/12/03-04/12/10 4,66408/06/01 0.0p 08/06/04-08/06/11 58,28730/11/01 0.0p 25/07/04-30/11/11 5,10626/07/02 0.0p 26/07/06-26/07/12 18,01929/07/02 0.0p 29/07/05-29/07/12 74,06426/08/02 0.0p 26/08/05-26/08/12 217,25102/09/02 0.0p 31/05/05-02/09/12 177,81613/12/02 0.0p 13/12/05-13/12/12 31,91413/12/02 0.0p 13/12/06-13/12/12 202,569

The Atkins Executive Share Option Scheme 01/02/95 137.5p 01/02/98-01/02/05 2,680

Executive Share Bonuses 01/04/00 0.0p 01/04/04-01/04/07 87,364

WS Atkins Employees’ Stock Option Plan 01/06/00 622.5p 01/06/03-01/06/10 81,46408/06/01 832.5p 08/06/04-08/06/11 102,72229/07/02 324p 29/07/05-29/07/12 128,900

WS Atkins Restricted Stock Unit Plan for Key Employees 02/07/02 0.0p 02/07/05 288,76913/12/02 0.0p 13/12/05 30,000

WS Atkins Restricted Stock Unit Plan for Executives 02/07/02 0.0p 02/07/05 39,89702/07/02 0.0p 02/01/03 2,86902/07/02 0.0p 02/07/03 9,81402/07/02 0.0p 02/01/04 9,81402/07/02 0.0p 02/07/04 9,820

WS Atkins Sharesave Scheme 16/07/99 424.0p 01/09/02-28/02/03 2,99107/07/00 502.0p 01/09/03-29/02/04 494,88306/07/01 666.0p 01/09/04-01/03/05 582,92822/08/02 259.2p 01/11/05-01/05/06 711,983

WS Atkins International Sharesave Scheme 20/10/00 672.0p 20/01/04-01/07/04 59,88122/10/01 528.0p 01/01/05-01/07/05 66,843

WS Atkins International Sharesave Scheme Irish Section 20/10/00 672.0p 01/01/04-01/07/04 5,16922/10/01 528.0p 01/01/05-01/07/05 6,872

WS Atkins Employees’ Stock Purchase Plan 22/10/01 472.0p 01/02/04-01/02/04 36,520

4,476,632Sharesave options to be satisfied by new issue of shares 1,052,756

Shares held by the Employee Benefit Trusts to satisfy outstanding options 3,423,876

On 4 April 2003 the Company issued 2,357,600 ‘A’ warrants, 1,178,800 ‘B’ warrants and 1,178,800 ‘C’ warrants which are convertible into ordinary shares of 0.5p each in three tranches. The ‘A’ warrants are convertible on or after 4 July 2003.The ‘B’ warrants are convertible on or after the 4 October 2003 and the ‘C’ warrants are convertible on or after the 4 January 2004.



24 ReservesOther Total

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

£m £m £m £m £m £m £m £m

GroupBalance at 31 March 2002 42.1 0.2 8.7 (15.9) 15.5 64.3 63.9 114.9Retained loss for the year – – – – – (57.1) (57.1) (57.1)Net differences on exchange – – – – – (1.9) (1.9) (1.9)Issue of new shares 13.3 – – – – – – 13.3 EBT contribution – – – – 2.5 (2.5) – – Transfer to EBT reserve – – – – (16.9) 16.9 – –

Balance at 31 March 2003 55.4 0.2 8.7 (15.9) 1.1 19.7 4.9 69.2

CompanyBalance at 31 March 2002 42.1 0.2 8.7 – – 8.3 8.3 59.3Retained loss for the year – – – – – (3.0) (3.0) (3.0)Issue of new shares 13.3 – – – – – – 13.3

Balance at 31 March 2003 55.4 0.2 8.7 – – 5.3 5.3 69.6

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 profit and loss.

25 Employee Benefit Trusts At 31 March 2003 there were four Employee Benefit Trusts (EBTs). The EBTs have acquired ordinary shares to facilitateemployee shareholdings through the WS Atkins incentive arrangements detailed in Note 23.

In compliance with UITF 13 the accounts of the EBTs have been incorporated into the results of the Group as, although theyare controlled by independent Trustees and their assets are held separately from those of the Group, in practice the Group’sadvice as to how the assets are used for the benefit of employees is normally accepted. The Group bears the major risks andrewards of the assets held by the EBTs until the shares vest unconditionally in the employees.

The contribution of the EBTs to the profit or loss reported by the Group and the net assets held by the EBTs included in theGroup figures are shown below. The information is based on the audited financial statements of the EBTs.

The financial accounts of the EBTs have been prepared under the historical cost convention. Income has been recognised as it becomes receivable and costs written off against profit on an accruals basis.

The cost of shares is amortised on a straight line basis down to the exercise price of each incentive scheme over the period to initial exercise date. Cumulative amortisation relating to options which have lapsed during the year is written back to profitand loss. Provision is made for impairment where there is considered to be a permanent distribution in value.

The shares held for the Geared Option Scheme are carried at cost, except where the Group considers there has been a permanent diminution in value. This review is undertaken annually for the Group’s accounts.


25 Employee Benefit Trusts (continued)The results included in the profit and loss account and balance sheet are as follows:

2003 2002Profit and loss account £m £m

Operating profit/(loss)(1) 0.2 (1.5)Loss on sale of fixed asset investments(2) (0.3) –Interest receivable and similar income 0.1 0.2

– (1.3)Amounts written off investments (16.4) –

Loss on ordinary activities before taxation (16.4) (1.3)Taxation on loss on ordinary activities – –

Loss on ordinary activities after taxation (16.4) (1.3)Capital Grant 2.5 1.9

Retained (loss)/profit for the period (13.9) 0.6

(1) Operating profit/(loss) includes amortisation credit of £0.4m (2002 charge: £1.8m). The amortisation arises on shares held for options where the optionprice is below book value and the difference is amortised over the period of service to which the option relates. Where options have lapsed the prior years’ amortisation is reversed.

The results are stated after the utilisation of £0.5.m (2002: £0.8m) of deferred consideration creditor (Note 19) in respect of amortisation and loss on sale of shares purchased for the future satisfaction of the Atkins Americas Inc., (formerly Benham) and Hanscomb deferred consideration arrangements.

(2) This represents the loss on the sales of investments by the EBTs which were purchased in the open market. Any gain on sales of ordinary shares issued by the Company to the EBTs has been taken directly to reserves.

Contributions by the Company and its subsidiaries to the EBTs were £2.5m (2002: £1.9m).

As explained in Note 3, a provision of £16.4m was made against the carrying value of the shares held by the EBTs.

2003 2002Balance sheet £m £m

Fixed assets – Investment in own shares at Net Book Value (Note 14) 14.7 29.0Cash 2.7 3.0Other debtors 0.5 0.9Current asset investments 0.4 0.4Taxation payable (0.4) (0.4)Other creditors falling due within one year (0.4) (1.0)Amounts due to WS Atkins (net) – falling due after one year (16.4) (16.4)

Net assets 1.1 15.5

Based on a mid-market price of 128.5 pence the market value of the shares on 31 March 2003 was £8.5m (2002: £40.4m).

26 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 subsidiarycompanies 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.



27 Financial and capital commitments2003 2002

£m £m

Capital expenditure contracted for but not provided 0.6 2.9

In addition to the above, the Group is committed to make payments for equity and debt into Special Purpose Companiesunder Private Finance Initiative contracts of £4.3m (2002: £5.2m).

Plant, machineryand vehicles Land and buildings

2003 2002 2003 2002£m £m £m £m

Operating leasesAmounts payable in the next year in respect of commitments expiring:

Within one year 1.0 1.0 5.0 4.1Between two and five years 5.1 5.5 6.3 8.2After five years – 0.1 9.7 14.4

Total 6.1 6.6 21.0 26.7

28 Financial instrumentsA description of the policies relating to financial instruments is set out in the accounting policies on page 41.

(a) Maturity of financial liabilitiesGroup Company

2003 2002 2003 2002£m £m £m £m

Less than one year 53.1 33.4 0.9 1.7Between one and two years 1.6 1.4 – –Between two and five years 42.1 36.6 – –More than five years 0.7 0.2 – –

97.5 71.6 0.9 1.7

Unutilised committed borrowing facilities expiring beyond 12 months fell wholly between two and five years and amounted to £51.3m (2002: £16.2m). Unutilised committed borrowing facilities expiring within 12 months amounted to £nil (2002: £95.0m).

The Group’s principal committed borrowing facilities of £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.

(b) Currency exposuresTo mitigate the effect of currency exposures arising from its net investment in the US, 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 thantheir local currency. Foreign exchange differences on retranslation of these assets and liabilities are taken to the profit and loss account of the Group companies and the Group.

Net foreign currency monetary assets/(liabilities)Other Total

Sterling US Dollar Euro currencies 2003As at 31 March 2003 £m £m £m £m £m

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

Total 1.2 – 0.1 (0.4) 0.9


28 Financial Instruments (continued)Under the Group’s accounting policy, foreign currency assets which are hedged using forward foreign exchange contracts or borrowings are translated at the contracted rates. The unrecognised gain or loss at the balance sheet date on forwardcurrency contracts to be recognised in the profit and loss account of the following year is not material.

i AssetsThe following analysis excludes short term debtors, cash held on behalf of sub-contractors and funds held by the Employee Benefit Trusts.

Total TotalSterling Euro US Dollar Danish Krone 2003 2002

£m £m £m £m £m £m

Fixed rate cash and short-term deposits 8.1 – – – 8.1 9.3Floating rate cash and short-term deposits 6.7 1.9 6.6 2.3 17.5 5.1

Total 14.8 1.9 6.6 2.3 25.6 14.4

ii LiabilitiesThe interest rate profile of the Group’s financial liabilities, excluding short-term creditors, at 31 March 2003 was as follows:

Floating Fixed rate Floating Fixed raterate finance rate finance

liabilities leases Total liabilities leases Total2003 2003 2003 2002 2002 2002

£m £m £m £m £m £m

Sterling 55.3 2.6 57.9 31.3 6.0 37.3US Dollar 31.3 – 31.3 26.9 – 26.9Euro 1.4 – 1.4 1.3 – 1.3Danish Krone 6.9 – 6.9 6.1 – 6.1

Total 94.9 2.6 97.5 65.6 6.0 71.6

The benchmark rate for determining the principal floating rate liabilities is calculated with reference to LIBOR. The weightedaverage interest rate on the fixed rate finance leases is 10.5%, over a weighted average period of 43 months. The Group’sliability with respect to the deferred consideration, which is free of interest, is excluded from the above 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, is considered tobe materially equivalent to their book value. The fair value of these assets and liabilities has been determined by discountingfuture cashflows of the relevant financial instrument at the Group’s incremental borrowing rate. The forward currencycontracts are used to manage the Group’s forward currency risk.

The fair value of forward currency contracts at the year-end, based on their market value, is detailed below:

2003 2003 2002 2002Book value Fair value Book value Fair value

£m £m £m £m

Forward currency hedges 1.2 1.2 8.5 8.5

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

29 Contingent liabilitiesThe Group has given indemnities in respect of overseas office overdraft, performance, advance payments, letters of credit and import duty guarantees issued on its behalf. The amount outstanding at 31 March 2003 was £62.6m (2002: £64.7m).The indemnities, which arose in the ordinary course of business, are not expected to result in any material financial loss.



30 Pension SchemesThe Group operates both defined benefit and defined contribution schemes. Membership of the Group’s principal pensionschemes is as follows:

Defined Benefit Schemes Defined Contribution Total MembershipAtkins Scheme

Staff Scheme Railways Scheme Atkins Staff Scheme Total Total2003 2002 2003 2002 2003 2002 2003 2002

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

Members 4,450 5,451 605 620 3,041 2,045 8,096 8,116Deferred pensioners 5,251 4,629 353 243 535 160 6,139 5,032Pensioners 1,620 1,445 89 74 – – 1,709 1,519

11,321 11,525 1,047 937 3,576 2,205 15,944 14,667

The assets of the defined benefit schemes are held in separate Trustee administered funds, and the pension cost and provisionare assessed in accordance with the advice of professionally qualified actuaries.

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

The latest actuarial valuation of the defined benefit section of the Atkins Staff Scheme (for both SSAP24 and funding purposes)was at 1 April 2001, using the projected unit method. The main assumptions used for the SSAP 24 valuation of the AtkinsStaff Scheme together with the assumptions used by the Trustees for funding purposes as at the last actuarial valuation arelisted in the table below.

SSAP 24 Trustees

Rate of inflation 3.00% 3.00%Real pension increases

Fixed 2.00% 2.00%Limited price indexation 0% 0%

Real salary increases 1.50% 1.50%Real dividend growth 1.25% 1.00%Real investment return (pre-retirement) 4.25% 4.00%

Under SSAP 24 assumptions the total market value of the assets at the date of the valuation was £374.5m and the actuarialvalue of the assets was sufficient to cover approximately 105% of the benefits that had accrued to members allowing forassumed future increases in earnings. The excess of assets over liabilities (surplus) of £18.5m is being amortised as a levelpercentage of salary over the estimated service lives of current employees in the Scheme through to 2016. As the Scheme is now closed to new members the current service costs, under the projected unit valuation basis, will increase as a percentageof salary as members of the Scheme approach retirement, although the overall cost will decrease as the number of members decreases.

The most recent triennial valuation of the Railways Pension Scheme (for both SSAP24 and funding purposes) took place at 31 December 2001 using the projected unit method. The assumptions which had the most significant effect on the results of the valuation for SSAP 24 reporting are those relating to the rate of return on future investments and the rates of increasesin salaries, pensions and dividend income. It was assumed that the investment return would be 2.75% higher than the rate of annual salary increases, 2.25% higher than the rate of future pension increases and 3.0% higher than the rate of dividendincome. The total market value of the assets at the date of valuation was £106.8m and the actuarial value of the assets wassufficient to cover approximately 128% of the benefits that had accrued to members allowing assumed future increases in earnings.

The excess of assets over accrued liabilities (surplus) of £23.0m is being amortised as a level percentage of salary over theestimated service lives of current employees in the Scheme through to 2014. In addition to this surplus there is a pensionprepayment, representing the excess of the amount funded over the accumulated pension cost, of £2.6m as at 31 March 2003(2002: £1.6m). 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 USA defined benefits scheme and the Eire Pension scheme (both closed to new entrants)and the Local Government Pension Scheme. The latter is a defined benefit scheme but as the Group’s contributions are largely set in relation to the current service period only, costs are accounted for on a contribution basis.


30 Pension Schemes (continued)The costs of the pension schemes under current accounting standard SSAP 24 are shown below:

2003 2002£m £m

Regular pension cost 20.9 21.5 Less employees’ contribution (6.7) (6.9)

Employer’s regular pension cost 14.2 14.6Atkins Staff Scheme 11.2 12.0Railways Scheme 2.6 2.2Other 0.4 0.4

Amortisation of surplus (3.7) (3.4)Atkins Staff Scheme (1.4) (1.4)Railways Scheme (2.3) (2.0)

Net pension cost of defined benefit schemes 10.5 11.2

Cost of defined contribution schemes 7.7 5.4Unfunded ex-Director’s promise (Note 21) (0.2) 0.025

Total pension cost 18.0 16.6

The net cost of the defined benefit schemes was £10.5m, a decrease of £0.7m over the previous year analysed as follows:

£m

2002 triennial valuation – Railways Scheme regular pension cost 0.2Membership changes and salary increases (net) (0.9)

Net reduction in cost (0.7)

The pension cost of the defined contribution schemes was £7.7m, an increase of £2.3m. The majority of new staff are offeredmembership of the defined contribution schemes following the closure of the defined benefits scheme to new entrants.

A provision of £17.9m (which incorporates the unfunded ex-Director’s promise) is included in provisions for liabilities andcharges representing the excess of accumulated pension cost over the amount funded (2002: £23.9m).

Financial Reporting Standard 17 – Retirement benefits (FRS 17)As noted in the 2002 accounts, the Board has decided to defer full implementation of FRS17 following the UK AccountingStandards Board proposal to extend the transitional regime for the new Standard.

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 schemes which operate 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 2003 by a qualified independent actuary. The principalassumptions used by the actuary were as follows:

At 31 At 31March 2003 March 2002

Rate of increase in salaries(1) 3.90% 4.00%Rate of increase of pensions in payment – Limited price indexation 2.40% 2.50%

– Fixed 5% 5.00% 5.00%Rate of increase of deferred pensions 2.40% 2.50%Discount rate 5.40% 6.00%Inflation assumption 2.40% 2.50%

(1) plus 0.75% p.a. promotional salary scale for the Railways Scheme.



30 Pension Schemes (continued)The assets in the schemes and the expected rate of return as at 31 March were:

2003 2002Long Atkins Long Atkinsterm Staff Railways term Staff Railways

rate of Scheme Scheme Total rate of Scheme Scheme Totalreturn £m £m £m return £m £m £m

Assets at market valueEquities 8.00% 199.5 70.3 269.8 7.90% 253.7 93.5 347.2Corporate bonds 4.80% 123.0 5.9 128.9 5.30% 111.9 7.2 119.1Property 6.70% – 6.3 6.3 7.10% 0.7 5.7 6.4Other/cash 3.75% 4.6 0.6 5.2 4.00% 12.1 0.9 13.0

Total market value of assets 327.1 83.1 410.2 378.4 107.3 485.7

Present value of scheme liabilities (530.7) (99.7) (630.4) (396.1) (96.5) (492.6)

(Deficit)/surplus in scheme (203.6) (16.6) (220.2) (17.7) 10.8 (6.9)Related deferred

tax asset/(liability) 61.1 5.0 66.1 5.3 (3.2) 2.1

Net pension (liability)/asset (142.5) (11.6) (154.1) (12.4) 7.6 (4.8)

The following amounts would have been recognised in the performance statements in the year to 31 March 2003 under therequirements of FRS 17:

AtkinsStaff Railways Total

Scheme Scheme 2003£m £m £m

Operating profitCurrent service cost (15.9) (2.6) (18.5)

Other finance incomeExpected return on pension scheme assets 28.1 5.0 33.1Interest on pension scheme liabilities (23.6) (3.6) (27.2)

Net return 4.5 1.4 5.9

Total profit and loss impact (11.4) (1.2) (12.6)

Statement of total recognised gains and lossesActual return less expected return on pension scheme assets 90.9 20.2 111.1% of assets at end of period 28% 24% 27%Experience losses/(gains) arising on the scheme liabilities 28.9 1.0 29.9% of liabilities at end of period 5% 1% 5%Changes in assumptions underlying the present value of the scheme liabilities 69.4 6.3 75.7

Actuarial loss/(gain) recognised 189.2 27.5 216.7

% of liabilities at end of period 36% 27% 33%

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:

2003 2002£m £m

Net assetsNet assets 69.7 115.4Adjust for SSAP 24 provision (net of deferred tax) 12.4 16.7FRS 17 pension liability (net of deferred tax) (154.1) (4.8)

Net (liabilities)/assets including FRS 17 pension liability (72.0) 127.3

ReservesProfit and loss reserve 4.9 63.9Adjust for SSAP 24 provision (net of deferred tax) 12.4 16.7FRS 17 pension liability (net of deferred tax) (154.1) (4.8)

Profit and loss reserve including FRS 17 pension liability (136.8) 75.8


30 Pension Schemes (continued)Movement in the pension scheme surplus/(deficit) during the year:

AtkinsStaff Railways Total

Scheme Scheme£m £m £m

At 1 April 2002 (17.7) 10.8 (6.9)Current service cost (15.9) (2.6) (18.5)Contributions 14.7 1.3 16.0Net finance income 4.5 1.4 5.9Actuarial loss (189.2) (27.5) (216.7)

At 31 March 2003 (203.6) (16.6) (220.2)

Since the date of the last formal valuations stock markets have declined and accrued liabilities of the schemes have increasedas a result of changes in financial conditions. This has resulted in a deficit in the fund at 31 March 2003, calculated inaccordance with the requirements of FRS 17 (see above). It is the Board’s intention to request an updated actuarial valuationof the Group’s defined benefit pension schemes during the first half of the new financial year and the Group’s accountingestimates with respect to pensions will be reviewed following this exercise. Preliminary discussions with the actuaries indicatethat in order to maintain existing benefits, additional contributions in the order of £6m per annum may be required for theAtkins Staff Scheme.

31 a) Reconciliation of net cash flow to movement in funds2003 2002

£m £m

Cash increase/(decrease) 30.3 (55.1)Cash outflow due to lease repayments 2.7 2.9Cash inflow from decrease in liquid resources (1.7) (7.8)Cash inflow from increase in short-term loans (non-EBT) (33.0) (12.3)Cash outflow from redemption of loan stock 0.8 0.4Cash inflow from increase in long-term loans (4.6) (3.4)

Increase in net debt resulting from cash flows (5.5) (75.3)

Increase in net debt from new finance leases (3.6) (2.9)Increase/(decrease) in current asset investment market value (Note 18) 0.1 (0.2)Profit on sale of current asset investments – 0.1Translation differences 0.5 0.1

Increase in net debt in year (8.5) (78.2)(Net debt)/net funds at 1 April (37.3) 40.9

Net debt at 31 March (45.8) (37.3)



31 b) Reconciliation of operating profit/(loss) to net cash inflow from operating activities2003 2002

£m £m

Operating (loss)/profit (49.9) 13.9Operations including amortisation of goodwill (49.8) 15.4Employee Benefit Trusts (0.1) (1.5)Depreciation charges 22.2 17.1Impairment of fixed assets 1.8 –Amortisation of goodwill 11.1 9.4Impairment of goodwill 30.7 –Amortisation of own shares (0.4) 1.8Loss/(profit) on disposal of tangible fixed assets 0.4 (0.3)Loss on disposal of fixed asset investments – own shares 0.3 –(Profit) on disposal of current asset investments – (0.1)(Profit) on disposal of current asset non-liquid investments (0.1) (0.7)Decrease/(increase) in stocks 0.4 (0.6)Decrease/(increase) in debtors 9.0 (42.2)(Decrease)/Increase in other creditors due within one year (4.2) 35.0Increase in other creditors due after one year 0.6 1.2Increase in other provisions for liabilities and charges 4.6 –Exchange rate effect on current assets (0.6) –

25.9 34.5(Decrease) in pension fund provision (5.8) (5.2)

20.1 29.3Operations 19.5 29.6Employee Benefit Trusts 0.6 (0.3)

Increase/(decrease) in amounts due to sub-contractors 6.5 (9.0)

Net cash inflow from operating activities 26.6 20.3


31 c) Analysis of net fundsOther

At Cash non-cash Exchange At31.3.02 Flow changes movement 31.3.03

£m £m £m £m £m

Cash at bank and in hand 6.3 11.7 – 1.1 19.1Bank overdrafts (14.6) 12.4 – – (2.2)Current asset liquid investments 8.1 (1.7) 0.1 – 6.5Debt due within one yearLoan notes (1.7) 0.8 – – (0.9)Bank loans (14.9) (33.0) – – (47.9)Finance leases (2.2) 2.7 (2.6) – (2.1)Debt due after one yearBank loans (34.4) (4.6) – (0.6) (39.6)Finance leases (3.8) – (1.0) – (4.8)

Total (57.2) (11.7) (3.5) 0.5 (71.9)Cash held on behalf of sub-contractors 16.5 6.5 – – 23.0EBT – cash 3.0 (0.3) – – 2.7EBT – certificate of tax deposit 0.4 – – – 0.4

(37.3) (5.5) (3.5) 0.5 (45.8)

Bank balances and cashflows as shown on the balance sheet and cashflow:

Cash at bank and in hand 6.3 11.7 – 1.1 19.1Cash held on behalf of sub-contractors 16.5 6.5 – – 23.0Employee Benefit Trusts 3.0 (0.3) – – 2.7

Cash as shown on balance sheet 25.8 17.9 – 1.1 44.8Overdrafts (14.6) 12.4 – – (2.2)

Net cash and cashflow 11.2 30.3 – 1.1 42.6

The net debt at 31 March 2003 includes amounts relating to the Group’s insurance subsidiary of £8.7m (2002: £10.2m).

As referred to in the accounting policy for turnover, under certain service contracts the Group manages customer expenditureand is obliged to purchase goods and services from third party sub-contractors and recharge them on to the customer at cost. As at 31 March 2003 £23.0m (2002: £16.5m) has been included within both cash and creditors (Note 19) as amounts due to sub-contractors.

31 d) Analysis of tax paid during the year2003 2002

£m £m

UK corporation tax paid 0.8 10.1 Overseas tax paid 1.0 0.9

1.8 11.0



32 AcquisitionsOn 24 June 2002 the Group acquired 100% of the share capital of Hanscomb International Corp., an Atlanta based projectand programme management consultancy for a consideration of £21.7m including deferred consideration of £2.3m payablein shares. Shares to the value of £2.3m have been acquired by the Employee Benefit Trusts, satisfied by a capital grant fromthe Company. As part of the acquisition agreement 70% will be utilised within three years of acquisition.

The net assets have been included in the accounts at fair value at the date of acquisition (£1.4m). Included in net assetsacquired was cash of £1.6m. The method used to account for the transaction is acquisition accounting.

Accounting Fair valueBook value adjustments adjustments Fair value

£m £m £m £m

Tangible fixed assets 1.0 (0.2) (0.2) 0.6Current assets 12.8 (1.3) (0.4) 11.1Current liabilities (9.4) – (0.9) (10.3)

Net assets acquired 4.4 (1.5) (1.5) 1.4

Consideration 21.7Cash paid 6.0Issue of shares 12.8Deferred consideration 2.3Legal expenses 0.6

Goodwill capitalised 20.3

The Accounting adjustments relate to the harmonisation of work in progress valuation policies and alignment of depreciation policies.

The Fair value adjustments arise from a review of the recoverability of work in progress and additional cut-off adjustments.

Goodwill arising on the acquisition is being amortised over ten years which is the period over which the Directors estimatethat the value of the underlying business acquired is expected to exceed the value of the underlying assets. A charge of £1.5m has been made to the profit and loss account for amortisation for the 9 months to 31 March 2003.

The consideration paid in respect of prior years’ acquisitions relates largely to deferred consideration in respect of theacquisition of Atkins Americas Inc., formerly the Benham Group Inc., in January 2000.


33 Subsidiary undertakingsThe following companies were the principal subsidiary undertakings as at 31 March 2003:

Country of registration/ Class and percentageincorporation of shares held Nature of business

ATMOS Limited England & Wales 100% ordinary Construction 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 Americas Inc.(1) (formerly Atkins Benham Inc.) USA 100% ordinary Architects and engineersHanscomb International Corp 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.

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.

A full list of subsidiary companies will be filed at Companies House.



34 Joint VenturesThe following represents the principal Joint Ventures in which the Group participated during the year:

Date of lastProportion of audited financial

Name Nature of business shares held(1) statements External auditors

Connect Roads Holding company for companies involved in the 32.14% 31 March 2002 Deloitte & Touche LLPLimited design and build, financing, operation

and maintenance of roads in the UK.

DG 21 LLC Delaware limited liability company involved in provision 24.5% 31 December 2002 Deloitte & Touche LLPof all non-core services for the US Navy Facility atDiego Garcia. The principal place of business is 4801Spring Valley Road, Suite 125B, Dallas, Texas 75244.

Mercia Healthcare Holding company for companies involved in the 25% 31 December 2002 PricewaterhouseCoopers LLP(Holdings) Limited design and construction of hospital accommodation

and the provision of full services to the accommodationwithin which the NHS may provide core clinical services.

NewSchools Limited Management Services Company for companies 50% 31 December 2002 Deloitte & Touche LLPinvolved in the design and construction of schoolaccommodation and the provision of full servicesto the accommodation within which the LEA mayprovide teaching.

NewSchools (Cornwall) Holding company for company involved in the 40% 31 December 2002 Deloitte & Touche LLPHoldings Limited design and construction of school accommodation

and the provision of full services to the accommodation within which the LEA may provide teaching.

NewSchools (Leyton) Provision of design and build, financing and 42.5% 31 December 2002 Deloitte & Touche LLPHoldings Limited operating services to a new secondary school

in London Borough of Waltham Forest.

NewSchools (Merton) Provision of design and build, financing and 42.5% Not yet published Deloitte & Touche LLPHoldings Limited operating services to six secondary schools in

the London Borough of Merton.

NewSchools Provision of design and build, financing and 42.5% 31 December 2002 Deloitte & Touche LLP(Penweddig) operating services to a new secondary schoolHoldings Limited in Aberystwyth, Wales.

NewSchools Holding company for company involved in the 65% 31 December 2002 Deloitte & Touche LLP(Swanscombe) design and construction of school accommodationHoldings Limited and the provision of full services to the accommodation

within which the LEA may provide teaching.

South Manchester Holding company for companies involved in 25% 31 December 2002 PricewaterhouseCoopers LLPHealthcare (Holdings) the design and construction of hospitalLimited accommodation and the provision of full services

to the accommodation within which the NHSmay provide core clinical services.

TFMC (Proprietary) Company incorporated in South Africa involved in 38.25% 30 June 2002 Fisher Hoffman PKFLimited providing asset management services in effective

South Africa. holding

Total Solutions for Joint Venture to provide 50% 31 December 2001 Deloitte & Touche LLPIndustry Limited Industrial PFI-type solutions.

(1) Proportion of shares held are in respect of ordinary share capital.

All of the above are incorporated in England and Wales unless otherwise stated.


35 Post balance sheet eventOn 4 April 2003 Financial Close was reached on the £17 billion Metronet London Underground Public Private Partnership in which the Group is a 20% equal partner. The 30-year partnership, which covers over two thirds of the LondonUnderground network, covers inter alia the repairs, refurbishment and modernisation of the stations. Metronet has contractedwith Trans4m Ltd, a Joint Venture company in which Atkins has a 25% shareholding, to undertake the civil engineering workand the refurbishment programme. Trans4m Ltd has signed a 71/2 year contract with Atkins for premises and civil design,inspection and assessment work and the design and build of new communication systems.

Atkins will invest £70m in Metronet by way of equity and shareholder subordinated debt over the first six years of theconcession, £2m of which was invested at Financial Close. Atkins has obtained standby Letters of Credit from its banks tosupport the deferred element of its equity commitment. The fees for the standby Letters of Credit included an agreement toissue warrants in respect of 4,715,200 Atkins shares (representing approximately 4.73% of Atkins’ current issued sharecapital) on Financial Close of Metronet. 50% of these warrants are exercisable at any time from 4 July 2003. A further 25%of them are exercisable at any time from 4 October 2003, and the remaining warrants are exercisable at any time from 4 January 2004. An amount of 0.5p (the nominal value of Atkins’ shares) is payable in respect of each Atkins’ share issued on the exercise of the warrants.

72 WS Atkins plc Annual Report 2003Five year summary

2003 2002 2001 2000 1999£m £m £m £m £m

Restated(1) Restated(1) Restated(1)

Turnover: Group and Share of Joint Ventures 1,012.2 880.9 711.7 525.3 428.6Less: Share of Joint Ventures’ turnover (76.9) (74.6) (38.3) (9.0) (4.7)

Turnover 935.3 806.3 673.4 516.3 423.9Cost of sales (576.1) (546.1) (420.7) (331.9) (284.8)

Gross profit 359.2 260.2 252.7 184.4 139.1Administrative expenses (409.1) (246.3) (225.8) (156.6) (114.2)

Operating (loss)/profit: Group excluding Share of Joint Venture (49.9) 13.9 26.9 27.8 24.9Operations (8.0) 24.8 39.1 34.7 27.0Amortisation and impairment of goodwill (41.8) (9.4) (8.9) (4.6) (0.5)Employee Benefit Trusts (0.1) (1.5) (3.3) (2.3) (1.6)

Operating profit: Share of Joint Ventures 14.2 14.5 8.7 3.2 0.9

Interest receivable and similar income 6.3 3.6 3.7 3.6 6.4Operations 3.8 3.0 3.5 3.5 6.3Joint Ventures 2.5 0.6 0.2 0.1 0.1

Amounts written off investments (16.4) – – – –

Interest payable and similar charges (15.8) (11.1) (8.1) (3.6) (1.4)Operations (5.8) (3.6) (3.5) (1.2) (0.4)Joint Ventures (10.0) (7.5) (4.6) (2.4) (1.0)

(Loss)/profit on ordinary activities before taxation (61.6) 20.9 31.2 31.0 30.8Operations (10.1) 24.0 39.0 37.1 32.9Joint Ventures 6.7 7.6 4.3 0.9 –Amortisation and impairment of goodwill (41.8) (9.4) (8.9) (4.6) (0.5)Employee Benefit Trusts (16.4) (1.3) (3.2) (2.4) (1.6)

Taxation on loss/profit on ordinary activities 7.3 (9.1) (11.5) (11.1) (10.1)Operations 9.1 (7.0) (10.3) (10.9) (10.0)Joint Ventures (1.8) (2.1) (1.2) (0.2) (0.1)

(Loss)/profit on ordinary activities after taxation (54.3) 11.8 19.7 19.9 20.7 Operations (17.4) 15.7 26.9 24.5 22.6 Joint Ventures 4.9 5.5 3.1 0.7 (0.1)Amortisation and impairment of goodwill (41.8) (9.4) (8.9) (4.6) (0.5)Employee Benefit Trusts – – (1.4) (0.7) (1.3)

Dividends (2.8) (10.2) (9.9) (8.8) (7.7)

Retained (loss)/profit for the year transferred to reserves (57.1) 1.6 9.8 11.1 13.0

Basic (loss)/earnings per share (58.7)p 13.1p 21.9p 23.0p 24.6pFully Diluted earnings per share (58.7)p 12.8p 21.2p 22.1p 23.2pAdjusted earnings per share(2) 16.5p 31.4p 30.2p 26.5p 21.3pDividends per share 3.00p 11.34p 10.80p 10.00p 9.25p

(1) All comparatives restated following adoption of FRS 19 and UITF Abstract 34. (2) Adjusted earnings per share is before Metronet bid costs, amortisation of goodwill and pension surplus, exceptional items and Employee Benefit Trusts.

Five year summaryConsolidated profit and loss account for years ended 31 March

73WS Atkins plc Annual Report 2003Five year summary

Five year summary continuedConsolidated balance sheet as at 31 March

2003 2002 2001 2000 1999£m £m £m £m £m


Fixed assetsIntangible assets 49.5 72.7 75.3 81.0 5.5Tangible assets 65.4 74.5 34.9 29.3 19.1Investments in Joint Ventures 19.5 17.4 11.2 5.9 4.2Investments – own shares 14.7 29.0 16.1 13.5 14.8Investments – other – 0.7 0.1 0.1 –

149.1 194.3 137.6 129.8 43.6

Current assetsStocks 0.4 0.8 0.2 0.3 0.2Debtors 244.2 228.8 188.0 161.9 96.2Investments 7.5 9.3 17.3 15.6 64.6Cash at bank and in hand 44.8 25.8 71.0 52.6 48.5

296.9 264.7 276.5 230.4 209.5

Current liabilitiesCreditors: amounts falling due within one year (302.5) (276.3) (231.3) (197.0) (158.5)

Net current (liabilities)/assets (5.6) (11.6) 45.2 33.4 51.0

Total assets less current liabilities 143.5 182.7 182.8 163.2 94.6

Creditors: amounts falling due after more than one year (51.1) (43.4) (40.5) (40.4) (2.4)Provisions for liabilities and charges (22.7) (23.9) (29.1) (24.0) (18.6)

Net assets 69.7 115.4 113.2 98.8 73.6

Capital and reservesCalled up share capital 0.5 0.5 0.5 0.5 0.5Share premium account 55.4 42.1 41.0 37.3 31.8Capital redemption reserve 0.2 0.2 0.2 0.2 0.2Merger reserve 8.7 8.7 8.7 8.7 –Profit and loss account 4.9 63.9 62.8 52.1 41.1

Shareholders’ funds – equity interests 69.7 115.4 113.2 98.8 73.6

(1) All comparatives restated following adoption of FRS 19 and UITF Abstract 34.

74 WS Atkins plc Annual Report 2003Five year summary

2003 2002 2001 2000 1999£m £m £m £m £m


Operating loss/(profit) (49.9) 13.9 26.9 27.8 24.9Operations (8.0) 24.8 39.1 34.7 27.0Amortisation and impairment of goodwill (41.8) (9.4) (8.9) (4.6) (0.5)Employee Benefit Trusts (0.1) (1.5) (3.3) (2.3) (1.6)

Depreciation charges 22.2 17.1 11.5 9.3 7.1Impairment of fixed assets 1.8 – – – –Amortisation of goodwill 11.1 9.4 8.9 4.7 0.5Impairment of goodwill 30.7 – – – –Amortisation of own shares (0.4) 1.8 3.6 3.1 2.4Loss/(profit) on disposal of tangible fixed assets 0.4 (0.3) (0.7) (0.4) (0.6)(Profit)/loss on disposal of current asset investments – (0.1) (0.3) 0.5 – Loss/(profit) on disposal of fixed asset investments – own shares 0.3 – (0.1) – – (Profit) on disposal of current asset non-liquid investments (0.1) (0.7) – – – Decrease/(increase) in stocks 0.4 (0.6) 0.1 (0.1) – Decrease/(increase) in debtors 9.0 (42.2) (22.1) (45.4) (13.1)(Decrease)/Increase in other creditors due within one year (4.2) 35.0 15.6 13.6 (2.5)Increase in other creditors due after one year 0.6 1.2 0.5 0.8 2.4 Increase/(decrease) in other provisions for liabilities and charges 4.6 – – 0.2 (0.1)(Decrease)/(increase) in pension fund provision (5.8) (5.2) 5.1 5.2 5.8 Exchange rate effect on current assets (0.6) – 0.1 – –

20.1 29.3 49.1 19.3 26.8 Operations 19.5 29.6 47.2 19.0 25.7 Employee Benefit Trusts 0.6 (0.3) 1.9 0.3 1.1

Increase/(decrease) in amounts due to sub-contractors 6.5 (9.0) 12.1 1.5 0.5

Net cash inflow from operating activities 26.6 20.3 61.2 20.8 27.3 Dividends received from Joint Ventures and Associates 6.5 0.8 0.6 – – Returns on investments and servicing of finance (2.2) (0.4) 0.5 3.0 5.8 Taxation (1.8) (11.0) (12.2) (14.4) (9.0)Capital expenditure and financial investment (18.8) (66.6) (19.1) (5.8) (15.2)Acquisitions and disposals (9.4) (9.6) (1.3) (61.6) (1.4)Equity dividends paid (6.6) (8.9) (8.1) (8.0) (7.1)Management of liquid resources 1.7 7.8 (1.4) 49.1 (12.7)Financing 34.3 12.5 (1.8) 17.8 –

Increase/(decrease) in cash 30.3 (55.1) 18.4 0.9 (12.3)


Five year summary continuedConsolidated cash flow for years ended 31 March

75WS Atkins plc Annual Report 2003Five year summary

2003 2002 2001 2000 1999£m £m £m £m £m


Increase/(decrease) in cash 30.3 (55.1) 18.4 0.9 (12.3)Cash outflow due to lease repayment 2.7 2.9 3.1 1.5 –Cash inflow/(outflow) due to change in liquid resources (1.7) (7.8) 1.4 (49.1) 12.7Cash inflow from short-term loans (non-EBT) (33.0) (12.3) (1.9) (0.6) –Cash outflow from redemption of loan stock 0.8 0.4 0.7 – –Cash outflow from short-term EBT loans – – – 3.0 –Cash inflow from long-term loans (4.6) (3.4) (0.1) (28.3) –

(Increase)/decrease in net debt resulting from cash flows (5.5) (75.3) 21.6 (72.6) 0.4

Increase in net debt from new finance leases (3.6) (2.9) (2.6) (8.1) –Increase in net debt from loan note issue – – – (2.8) –Increase/(decrease) in current asset investment market value 0.1 (0.2) 0.4 (0.3) 0.1Profit/(loss) on sale of current asset investments – 0.1 (0.1) (0.5) –Translation differences 0.5 0.1 (2.1) (0.8) (0.1)

Movement in year (8.5) (78.2) 17.2 (85.1) 0.4Net (debt)/funds at 1 April (37.3) 40.9 23.7 108.8 108.4

Net (debt)/funds at 31 March (45.8) (37.3) 40.9 23.7 108.8


Five year summary continuedReconciliation of net cash flow to movement in net debt

Annual General MeetingThe Annual General Meeting will be at 4.30pm on 16 September 2003 at the Chalk Lane Hotel, Chalk Lane, Epsom, Surrey. The fullNotice of the Meeting and proxy card is enclosed with this report.

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 shares should be directed in the first instance to the Registrar whose addressis The Registrar, Registration Department, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4BR. Website: www.capita-irg.com

Share dealing serviceDetails of a postal dealing service can be obtained from: WS Atkins plc Share Dealing Service, Cazenove & Co. Ltd, 20 Moorgate,London, EC2R 6DA. Telephone: 020 7155 5155 Website: www.cazenove.com

Dividend reinvestment planA dividend reinvestment plan is available by which ordinary shareholders may invest the whole of their cash dividends in WS Atkins plc ordinary shares. Current shareholders will receive further details with the notice of the Annual General Meeting.Ordinary shareholders on the register on 8 August 2003 may participate in the plan provided their application forms arereceived by 9 September 2003.

Copies of the explanatory brochure and application form are available from the Registrar.

Amalgamation of accountsShareholders who receive duplicate sets of Company mailings owing to multiple accounts in their name should write to the Registrar to have their accounts amalgamated.

Unsolicited mailThe Company is obliged by law to make its share register available to other organisations who may then use it for a mailing list. If you wish to limit the receipt of unsolicited mail you may do so by writing to: The Mailing Preference Service (MPS), Freepost 22,London W1E 7EZ. MPS will then notify the bodies which support its service that you do not wish to receive unsolicited mail.

Registered office and advisors

Investors’ information

Registered office: WS Atkins plcWoodcote GroveAshley RoadEpsomSurrey KT18 5BW

Registered number: 1885586

Auditors PricewaterhouseCoopers LLP1 Embankment PlaceLondon WC2N 6NN

Bankers The Royal Bank of Scotland plc135 BishopsgateLondon EC2M 3UR

Barclays Bank plcPO Box 54454 Lombard StreetLondon EC3V 9EX

HSBC Bank plc70 Pall MallLondon SW1Y 5EZ

Investment bankers N M Rothschild & Sons LimitedNew CourtSt Swithin’s LaneLondon EC4P 4DU

SolicitorsFreshfields Bruckhaus Deringer65 Fleet StreetLondon EC4Y 1HS

StockbrokersCazenove & Co. Ltd20 MoorgateLondon EC2R 6DA

76 WS Atkins plc Annual Report 2003Investors’ information

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WS Atkins plcAnnual Report 2003

WS Atkins plcWoodcote GroveAshley RoadEpsomSurrey KT18 5BWEngland

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

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annual 03

Documents

ws atkins plcannual

ws atkins plc annual

financial statements72

coming year

challenging year

metronet bid costs

review12 financial review

adjusted profit