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Report and financial statements31 December 2016

Mott MacDonald Limited

Report and financial statements I Mott MacDonald Limited

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DirectorsKeith Howells Mike HaighGuy Leonard Ed Roud Mike BarkerChris Davis

Company SecretaryJoanna Field

AuditorsGrant Thornton UK LLPGrant Thornton HouseMelton StreetEuston SquareLondon NW1 2EPUnited Kingdom

Registered officeMott MacDonald House8-10 Sydenham RoadCroydon CR0 2EEUnited Kingdom

Registered No. 1243967

+44 (0)20 8774 2000mottmac.com

Mott MacDonaldLimited

Strategic report

Market overviewDuring 2016, economic recovery continued slowly acrossmost major economies, however the decline in the globalmining sector, depressed oil prices, and uncertainty causedby the UK EU referendum have all contributed to mixedmarket conditions for private and public infrastructure acrossthe world.

Despite this, the UK provided opportunities for growth in allour core sectors. The picture in the Middle East was mixed,with oil and gas projects delayed or cancelled due todepressed oil prices. The outlook for 2017 continues to reflectthe uncertainties around the world, however there continue tobe strong prospects in our core markets and sectors.

PerformanceGross revenue of £675.1m was 5% up on 2015 (£642.6m). TheUK business continued to benefit from the government’spursuit of infrastructure projects as an engine for economicgrowth. The regulated asset-based industries also providedopportunity, particularly water, as clients continued delivery oftheir investment programmes. All our other core businessesin the UK delivered good growth.

All UK sectors delivered good profits, except Transportation,impacted by project losses in the UK roads market, andInternational Development Business, impacted by pursuinginvestment in new work opportunities.

Profit before tax of £47.0m was 15% up on 2015 (£40.7m).Organic growth was solid and the current year profit alsobenefited from a large intercompany dividend (£6m). Therewas a large unrealised exchange gain (£23m) mainly onintercompany balances, but that was partly offset byprovisions against some of these balances.

Net interest receivable increased from £7.9m to £9.7m, largelydue to intercompany interest from group companies which iseliminated at group level. Excluding intercompany interest oninternal funding, the net position is interest payable on a bankloan of £0.9m (2015 – £1.2m).

The effective tax rate is 10.9% (2015 – 18.3%). The decrease islargely due to the recognition of the savings in previous yearsfrom the introduction in the UK of an overseas branch profitsexemption and a reduction in non-tax-deductible items.

The key non-financial indicators that are used to measureperformance are set out and described in the corporateresponsibility statement.

Statement of financial positionNet assets have increased slightly from £307.9m to £313.3m.Profit after taxation of £41.8m has been offset by the impact ofFRS 102 pension accounting £20.8m and dividends paid of£15.2m.

Trade debtors and amounts recoverable on contracts haveincreased 18% from £171.8m to £202.7m. Even after takingcurrency effects of £11.9m into account, the increase is largerthan would be planned given the organic growth of thebusiness. Steps are being taken to correct this recognisingthe challenging trading environment that currently exists.

Gearing and cash flowDespite the adverse trends in working capital, the businesscontinues to generate more than sufficient cash flow tomaintain its liquidity at acceptable levels and to fund organicgrowth. Cash balances increased from £44.5m to £49.5m, thatafter repayment of £17.8m of the bank loan in place, reducingit from £39.8m to £22.0m. Net cash increased from £4.7m to£27.5m during the year.

Liquidity ratios remain strong and the company has movedfrom a net debt position of £20.1m at the end of 2014, havingtaken out significant funding for acquisition purposes, to a netcash position of £27.5m, a £47.6m swing in a 24 month period.The focus on improving working capital in 2017 will help tocontinue this good cash flow to fund further loan repaymentsand organic growth.

The parent company, Mott MacDonald Group Limited, has£90m of committed facilities in place until June 2018. It alsohas bond facilities to provide tender bonds, performancebonds and advance payment bonds in the normal course ofbusiness.

Contracted workThe order book is strong and our core markets should providegood opportunity for us to drive the business forward. It isexpected that the UK will continue to see good growth. TheMiddle East is uncertain due to the ongoing issues around oilprices and the impact this has on oil and gas projects and oilrevenues used to fund large infrastructure projects.

Mott MacDonald Limited I Report and financial statements

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Strategic report

Principal risks and uncertainties

Business risksBusiness risks are managed through appropriate directives,systems and processes. Control is exercised through staffcompliance with mandatory directives which requireappropriate management authority to be gained beforestarting activities which may bring risk to the company. Inparticular, clearance to commit the company to activitieswhich may subject the business to unlimited liability requiresthe written authority of the Group managing director.

The Business Management System (BMS) is designed to befully compliant with international ISO standards or Britishstandards where international standards are not yet available.These standards cover quality, safety, ethics, security andenvironment. Operational risk control was further enhancedby the continued roll out and development of processmanagement software, which is mandatory in its applicationacross the Group.

Overarching the directives, systems and process control, arethe risk management committees at both Group and businessunit level. These committees consider the effectiveness of ourdirectives and systems, and the likelihood and impact of risksfacing the business. Mitigation measures are developed bythese committees and cascaded throughout the business.

We have comprehensive professional indemnity, publicliability and employers’ liability insurance policies in place tomitigate the impact of risk realisation.

Financial risksThe company is exposed to liquidity risk, credit risk andexchange risk and has a variety of controls and processes inplace to manage these risks to minimise financial loss. Themore important aspects are:l For investments, where viable, all counterparties must meet

a minimum credit rating of A-1 long term and P-1 short term.l The company does not undertake any speculative trades.l In evaluating transactional exchange rate risk, the net

exposure would be hedged with forward currencycontracts, where necessary.

l In evaluating translational exchange rate risk, the companydoes not use hedging instruments.

l Credit control procedures are undertaken during thebidding period, and for the duration of the contracts.

l Working capital and cash flow targets are monitored andmanaged on a daily basis, with weekly reporting to theexecutive team and monthly reporting to the ExecutiveBoard, including monthly targets and forecasts.

Any material transaction and translation exposure aftermatching is monitored by management with appropriateaction taken if necessary. There is no material interest raterisk at the year end. The company hedges interest rateexposures as necessary.

Looking forwardThe company is well positioned for growth in its core markets.The current macroeconomic pressures may createuncertainty in 2017, particularly from speculation aroundBritain leaving the EU. However, the continuing, albeit slow,recovery of the UK economy will provide a platform forgrowth given the strength of our core sectors.

Approved by the board of directors and signed on its behalf:

Mike Haigh, Managing Director1 March 2017


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Corporate responsibility

The company has strategies, policies and initiatives which aredriven from the Group’s overall approach to corporateresponsibility.

Running a responsible, sustainable business Running a business responsibly is key to its long termsustainability. Whether it’s our corporate governance andstrategy, or the planning, finance, design, and delivery of theprojects we work on, we recognise that the decisions wemake have economic, social and environmentalconsequences.

On all our projects, we pursue the best possible outcomes forour clients, their clients – our ultimate customers – and ourcommunities. The aims of many of our projects are alignedwith those of the United Nations’ Sustainable DevelopmentGoals (SDGs) which set stretching targets for us, our clientsand our delivery partners. We also support many of the SDGsthrough our culture and behaviour as an organisation. Wehave a long and proud ethos of combating bribery andcorruption, respecting the people and environments we workwith, and of pursuing equality, diversity and inclusion, throughour own activities and through responsible procurement ofgoods and services.

The fundamental principles supporting our corporatesustainability are enshrined in our core values of Progress,Respect, Integrity, Drive, Excellence – PRIDE.

Non-financial key performance indicators which we measureare summarised below.

Better outcomes for customersl We are working with clients to understand their needs and

develop solutions from the starting point that advancingsustainability will deliver not just ‘least harm solutions’, butwill contribute to enhanced commercial performance alliedwith better social and environmental outcomes.

l Care for major clients is led by key account leaders whoare responsible for co-ordinating Mott MacDonald’srelationships with them, positioning the company toprovide the best possible service, and responding to theirneeds.

l We maintained ISO 9001 and ISO 14001 certification forquality management and environmental management.

l Building Information Modelling (BIM) and the use of acommon data environment is now standard for delivering

large engineering projects and we’ve led the infrastructureindustry in implementing Level 2 BIM, contributing tostronger performance against cost, time, carbon, and safetyindicators.

l We are moving swiftly to being ‘digital by default’ in projectdevelopment and delivery, communication and recordkeeping, making it easier for staff to collaborate and shareinformation internally and externally.

l We have introduced sustainability risk management intoour decision making processes. We consider the impact allprojects might have on the environment, people andeconomies before bidding for work.

l We promote technical excellence and innovation throughour practice network, and exemplified by six Group-levelinternal awards schemes. Externally, over 100 awards werewon in 2016.

Environmental performanceThrough our project work, we are involved in realisingimprovements across all our core engineering disciplines. Inaddition, we have acted to promote the core messages of theUK Government’s Infrastructure Carbon Review (ICR) – whichwe were instrumental in supporting – and fulfil our ICRpledges to: l Show industry leadership in influencing customers and

partners to reduce carbon: we held our fourth ‘CarbonCrunch’ event looking at how companies are getting onwith their ICR pledges and how carbon management canbe better integrated through the PAS 2080 standard.

l Champion lean solutions including BIM and offsiteconstruction: assisted by Carbon Portal, our carbon andcost modelling tool, which was launched in 2016, we arehighlighting the potential for BIM and design formanufacture and assembly to cut waste and driveefficiency.

l Reduce energy use and carbon: our 2015 carbon footprintwas 2.33tCO2 equivalent per employee. We achieved a 3.4% reduction on 2014 figures for our group carbonfootprint. Our carbon management strategy and climaterisk assessment were submitted to the Carbon DisclosureProject and awarded a score B- in the first year under anew rating system. Our 2016 figures are under compilation.

Developing talent, taking care of our peopleWe are continuing to equip managers with skills foridentifying, nurturing and harnessing talent.l We have launched Emerging Leaders – a global initiative to


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Corporate responsibility

accelerate the development of future leaders.l We are enabling global staff mobility, allowing our people

to grow professionally by working in new environmentsand cultures.

l We are providing added focus on work-related stress, safedriving and cycling.

l Our ‘Advance’ network in the UK continues to promoteequality, diversity and inclusion through its regionalchampions, training, and awareness building, and in 2016began to extend the principles to other regions.

l We remain a member of The 5% Club, an initiative focusedon recruiting apprentices and graduates to the UKworkforce. Members of the club commit to ensuring that5% of their UK workforce consists of apprentices,graduates or sponsored students; ours is 13%.

Contributing to our communitiesl Globally, we support staff with financial contributions and in

kind to help charitable and voluntary activities they areinvolved in. Not only do we believe it is important for theengagement and wellbeing of our staff; we also gain, sinceindividuals develop skills and experience whilevolunteering that they bring into the group for the benefitof their clients, colleagues and projects.

l We nurture new talent and encourage young people toconsider careers in our industries:– Senior staff contribute to academic programmes and

research at numerous universities across the globe.– In the UK, we sponsor two students per year through the

Institution of Civil Engineers’ Quest programme.– We provided 114 summer internships and 31 industrial

placements in 2016.– We recruited 21 apprentices through the Engineering

Technician Apprenticeships Programme in 2016, bringingthe number of young people recruited as apprentices todate to 101.

– Each year we organise work experience placements forschoolchildren, and we are working with schools andnon-governmental organisations to promote science,technology, engineering and mathematics subjects.Many staff attend school careers events.

l With customers and delivery partners we seekopportunities to create local employment, improved accessto jobs, better health and education, skills training andtransfer, and environmental improvements.

Managing risk, safety, and ethicsl We do not tolerate unethical behaviour. Leadership on

ethics is led from the top of the organisation by ourchairman and provides industry leadership on upholdingstrong ethical values.

l Our global approach to managing risks related to briberyand corruption are certificated as compliant with BritishStandard 10500 – Anti-Bribery.

l Business ethics training is a mandatory component of theinduction process for all staff and is repeated regularly.

l All reports received through our whistle-blowing processare treated confidentially and are fully investigated.

l Sustainability risks are now considered on all projects.Project managers will be required to analyse a project’spotential for social and environmental harm. This helps usto mitigate material and reputational risks.

l Our country managers are selected for their localknowledge of ethical risks and their ability to promote ourzero tolerance approach.

l Our ‘CLASS’ risk management approach has beencommunicated afresh to all staff.

l In terms of health and safety, 936 near misses – nowtermed as positive interventions – were logged in 2016, upfrom 632 in 2015, while the number of accidents fell from279 in 2015 to 242. These figures show significant year onyear improvement in awareness of safety risk. However,the number of days lost due to accidents rose from 159 in2015 to 182 in 2016 – all resulting from 20 accidents. Therewere 101 reported cases of work-related ill health resultingin 1,271 lost days. There is action being taken to monitorand reduce the impact of work-related ill health and it is amajor focus for 2017.

l The Group’s approach to all areas of risk managementadopts many aspects of ISO 31000 – Risk Management.

l We comply with national legislation and regulations in thecountries where we deliver projects.

l Information quality and security are supported through ourintegrated management system and aligned with ISO27001, the international standard for informationmanagement.

Keith Howells, Chairman1 March 2017


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The directors present their report, together with the auditedfinancial statements of the company for the year ended 31 December 2016.

RegistrationMott MacDonald Limited is a company registered in Englandand Wales with registered number 1243967.

Results and dividendsThe profit for the year after taxation amounts to £41.8m (2015 – £33.3m). The directors recommended an interimdividend of £15.2m (2015 – £13.0m) and this was paid on 15 December 2016. The directors do not propose a finaldividend.

Principal activitiesMott MacDonald is one of the world’s leading engineering,management and development consultancies. Its corebusiness sectors are the built environment, energy, transport,water, advisory and international development.

DirectorsThe following were directors of the company during the yearended 31 December 2016:

Mike BarkerChris DavisKevin DixonMike HaighKeith HowellsGuy LeonardEd Roud

Kevin Dixon resigned as a director on 31 March 2016.

Employment policiesThe company actively encourages employees to play a part indeveloping the company’s business and in enhancing itsperformance. Increasing share ownership worldwide in theultimate parent undertaking, Mott MacDonald Group Limited,is a key element of this policy. In addition, the companyrecognises individual contributions through bonuses andannual awards.

The company proactively informs staff on general, financialand economic factors influencing the company, as well as onall matters affecting them directly. This is achieved through

our intranet, staff councils and briefings, chairman’s emails,local and regional staff newsletters and copies of all thecompany’s corporate magazines and reports.

Company policy is to employ, develop and promote staffbased solely on aptitude, ability and work ethic. As a result,our staff come from a very wide diversity of backgrounds.

The company wishes to ensure that no discrimination occurs,either directly or indirectly, against individuals with a disabilityon the grounds of that disability in relation to recruitment,promotion, training, benefits, terms and conditions ofemployment and dismissal. Wherever possible, reasonableadjustments will be made to either the workplace, workstationor working environment to help employees cope withdisabilities.

Principal risks and uncertaintiesBusiness risks, financial risks and factors to mitigate the risksare described in the strategic report.

Statement of directors’ responsibilitiesThe directors are responsible for preparing the annual reportwhich includes the strategic report, the directors’ report andthe financial statements in accordance with applicable lawand regulations.

Company law requires the directors to prepare financialstatements for each financial year. Under that law thedirectors have elected to prepare the financial statements inaccordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standardsand applicable laws, including FRS 102 ‘The FinancialReporting Standard applicable in the UK and Republic ofIreland’). Under company law the directors must not approvethe financial statements unless they are satisfied that theygive a true and fair view of the state of affairs and profit orloss of the company for that period.

In preparing these financial statements, the directors arerequired to:l select suitable accounting policies and then apply them

consistently;l make judgements and accounting estimates that are

reasonable and prudent;l state whether applicable UK Accounting Standards have

been followed, subject to any material departures

Directors’ report


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Directors’ report


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disclosed and explained in the financial statements; andl prepare the financial statements on a going concern basis

unless it is inappropriate to presume that the company willcontinue in business.

The directors are responsible for keeping adequateaccounting records that are sufficient to show and explain thecompany’s transactions and disclose with reasonableaccuracy at any time the financial position of the companyand enable them to ensure that the financial statementscomply with the Companies Act 2006. They are alsoresponsible for safeguarding the assets of the company andhence for taking reasonable steps for the prevention anddetection of fraud and other irregularities.

The directors confirm that:l so far as each director is aware, there is no relevant audit

information of which the company’s auditor is unaware; andl the directors have taken all steps that they ought to have

taken as directors in order to make themselves aware ofany relevant audit information and to establish that theauditor is aware of that information.

The directors are responsible for the maintenance andintegrity of the corporate and financial information includedon the company’s website. Legislation in the United Kingdomgoverning the preparation and dissemination of financialstatements may differ from legislation in other jurisdictions.

AuditorGrant Thornton UK LLP offer themselves for reappointment asauditor in accordance with Section 485 of the Companies Act2006.

Approved by the board of directors and signed on its behalf:

Joanna Field, Company Secretary1 March 2017

Independent auditor’s reportto the members of Mott MacDonald Limited

We have audited the financial statements of Mott MacDonaldLimited for the year ended 31 December 2016 which comprisethe statement of comprehensive income, the statement offinancial position, the statement of changes in equity and therelated notes. The financial reporting framework that hasbeen applied in their preparation is applicable law and UnitedKingdom Accounting Standards (United Kingdom GenerallyAccepted Accounting Practice), including ‘FRS 102 TheFinancial Reporting Standard applicable in the UK andRepublic of Ireland’.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has been undertakenso that we might state to the company’s members thosematters we are required to state to them in an auditor’s reportand for no other purpose. To the fullest extent permitted bylaw, we do not accept or assume responsibility to anyoneother than the company and the company’s members as a body, for our audit work, for this report, or for the opinionswe have formed.

Respective responsibilities of directors and auditorAs explained more fully in the statement of directors’responsibilities on pages 6 and 7, the directors areresponsible for the preparation of the financialstatements and for being satisfied that they give a true andfair view. Our responsibility is to audit and express an opinionon the financial statements in accordance with applicable lawand International Standards on Auditing (UK and Ireland).Those standards require us to comply with the AuditingPractices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statementsis provided on the Financial Reporting Council’s website atwww.frc.org.uk/auditscopeukprivate.

Opinion on financial statementsIn our opinion the financial statements:l give a true and fair view of the state of the company’s

affairs as at 31 December 2016 and of its profit for the yearthen ended;

l have been properly prepared in accordance with UnitedKingdom Generally Accepted Accounting Practice; and

l have been prepared in accordance with the requirementsof the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion, based on the work undertaken in the course ofthe audit:l the information given in the Strategic Report and Directors’

Report for the financial year for which the financialstatements are prepared is consistent with the financialstatements.

l the Strategic Report and Directors’ Report have beenprepared in accordance with applicable legal requirements.

Matter on which we are required to report under theCompanies Act 2006In the light of the knowledge and understanding ofthe company and its environment obtained in the course ofthe audit, we have not identified any material misstatementsin the Strategic Report and Directors’ Report.

Matters on which we are required to report byexception We have nothing to report in respect of the following matterswhere the Companies Act 2006 requires us to report to youif, in our opinion:l adequate accounting records have not been kept, or

returns adequate for our audit have not been receivedfrom branches not visited by us; or

l the financial statements are not in agreement with theaccounting records and returns; or

l certain disclosures of directors’ remuneration specified bylaw are not made; or

l we have not received all the information and explanationswe require for our audit.

Stephen Maslin, Senior Statutory Auditorfor and on behalf of Grant Thornton UK LLPStatutory Auditor, Chartered AccountantsLondon1 March 2017


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2016 2015Notes £000 £000

Gross revenue 5 675,105 642,610Cost of sales (417,709) (390,761)

Gross profit 257,396 251,849Administrative expenses (221,952) (215,829)

Operating profit 6 35,444 36,020Provision for impairment of investments 14 (2,114) (1,785)Income from other fixed asset investments – 35Fair value adjustments 14 962 935Dividends received from subsidiary undertakings 6,000 –

Profit on ordinary activities before interest 40,292 35,205Net interest receivable 9 9,683 7,915Other finance cost 25 (3,000) (2,400)

Profit on ordinary activities before taxation 46,975 40,720Tax on profit on ordinary activities 10(a) (5,129) (7,454)

Profit on ordinary activities after taxation 41,846 33,266

Other comprehensive lossActuarial loss on pension scheme 25 (21,600) (21,300)Deferred tax on actuarial loss 10(c) 3,672 3,834Deferred tax on additional pension contributions 10(c) (2,380) (2,430)Deferred tax rate change on opening pension scheme deficit 10(c) (465) (776)

Total other comprehensive loss (20,773) (20,672)

Total comprehensive income for the year 21,073 12,594

The company’s gross revenue and operating profit relate to continuing operations.

Statement of comprehensive incomefor the year ended 31 December 2016


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Statement of financial positionat 31 December 2016

2016 2015Notes £000 £000

Fixed assetsIntangible assets 12 3,055 142Tangible assets 13 8,993 9,027Investments 14 78,203 77,954

90,251 87,123

Current assetsDebtors 15 585,284 531,238Cash at bank and in hand 49,523 44,541

634,807 575,779Creditors: amounts falling due within one year 16 (292,324) (229,295)

Net current assets 342,483 346,484

Total assets less current liabilities 432,734 433,607

Creditors: amounts falling due after more than one year 17 (22,000) (39,800)

Provisions for liabilities 20 (1,928) (1,047)

Net assets excluding pension liability 408,806 392,760

Pension liability 25 (95,494) (84,894)

Net assets including pension liability 313,312 307,866

Capital and reservesCalled up share capital 21 10,000 10,000Profit and loss account 22 303,312 297,866

Shareholders’ equity 313,312 307,866

These financial statements were approved by the board of directors on 1 March 2017.

K J Howells, Chairman


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Statement of changes in equityfor the year ended 31 December 2016

Called up Profit andshare losscapital account Total

Notes £000 £000 £000

At 1 January 2015 10,000 299,255 309,255

Profit for the year 22 – 33,266 33,266

Other comprehensive loss:Actuarial loss on pension scheme 25 – (21,300) (21,300)Deferred tax on actuarial loss 10(c), 22 – 3,834 3,834Deferred tax on additional pension contributions 10(c), 22 – (2,430) (2,430)Deferred tax rate change on opening pension scheme deficit 10(c), 22 – (776) (776)

Total other comprehensive loss for the year – (20,672) (20,672)

Dividends paid 11 – (12,964) (12,964)

Distributions to fellow subsidiary undertakings – (1,019) (1,019)

At 31 December 2015/1 January 2016 10,000 297,866 307,866

Profit for the year 22 – 41,846 41,846

Other comprehensive loss:Actuarial loss on pension scheme 25 – (21,600) (21,600)Deferred tax on actuarial loss 10(c), 22 – 3,672 3,672Deferred tax on additional pension contributions 10(c), 22 – (2,380) (2,380)Deferred tax rate change on opening pension scheme deficit 10(c), 22 – (465) (465)

Total other comprehensive loss for the year – (20,773) (20,773)

Dividends paid 11 – (15,246) (15,246)

Distributions to fellow subsidiary undertakings – (381) (381)

At 31 December 2016 10,000 303,312 313,312


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Notes to the financial statementsat 31 December 2016

1. Company information

Mott MacDonald Limited is a company registered in England and Wales with registered number 1243967. The registered officeis: Mott MacDonald House, 8-10 Sydenham Road, Croydon, CR0 2EE, United Kingdom.

2. Basis of preparation

These financial statements have been prepared in accordance with applicable United Kingdom accounting standards, includingFinancial Reporting Standard 102 – ‘The Financial Reporting Standard applicable in the United Kingdom and Republic ofIreland’ (‘FRS 102’), and with the Companies Act 2006. The financial statements have been prepared on the historical cost basisexcept for the modification to a fair value basis for certain financial instruments as specified in the accounting policies below.

The company is exempt from preparing consolidated financial statements on the grounds that it qualifies as an intermediateparent company under Section 400 of the Companies Act 2006. These financial statements therefore present information aboutthe company as an individual undertaking and not about its group.

The company has adopted the exemption from disclosing a statement of cash flows and the related notes in accordance withSection 1.11 of FRS 102. The equivalent disclosure is included in the consolidated financial statements of the company’sultimate parent undertaking, Mott MacDonald Group Limited.

Mott MacDonald Employee TrustMott MacDonald Limited is the sponsoring entity for the Mott MacDonald Employee Trust (‘Employee Trust’).

The Employee Trust has been in place since 1986. Its purpose is to support the framework of employee share ownership in theultimate parent company, Mott MacDonald Group Limited. The Employee Trust acts as a warehouse to ensure that the internalmarket for shares in the parent company, Mott MacDonald Group Limited, can operate fluidly during the year. The EmployeeTrust sells shares to employees when they are given the opportunity to buy shares at fair value in the parent company and theEmployee Trust buys shares in the parent company at fair value when they are sold by employee shareholders.

The results, assets and liabilities of the Employee Trust have been included in these financial statements.

Going concernAfter considering the company’s future prospects, its cash flow forecasts and bank facilities available, the directors have fullexpectation that the company has adequate resources to continue in operational existence for the foreseeable future. For thisreason they continue to adopt the going concern basis in preparing the financial statements.

Ultimate parent undertakingThe company’s ultimate parent undertaking is Mott MacDonald Group Limited, a company registered in England and Wales.Copies of the Group financial statements can be obtained at a nominal cost from the registered office, Mott MacDonald House, 8-10 Sydenham Road, Croydon, CR0 2EE, United Kingdom.

The largest and smallest group of undertakings for which group financial statements have been drawn up is that headed byMott MacDonald Group Limited.

3. Significant judgements and estimates

Preparation of the financial statements requires management to make significant judgements and estimates. The items inthe financial statements where these judgements and estimates have been made include:

Contract accounting and recoverability of receivablesThe company’s contract accounting policy is central to how the company values the work it has carried out in each financialyear. This policy requires forecasts to be made on the projected outcomes of projects. These forecasts require assessmentsand judgements to be made on changes in work scopes, changes in costs and costs to completion, for example. While theassumptions made are based on professional judgements, subsequent events may mean that estimates calculated prove to beinaccurate, with a consequent effect on the reported results.


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3. Significant judgements and estimates (continued)

Goodwill and other intangible assetsThe company establishes a reliable estimate of the useful life of goodwill and intangible assets arising on businesscombinations. This estimate is based on a variety of factors such as the expected use of the acquired business, the expectedusual life of the cash generating units to which the goodwill is attributed, any legal, regulatory or contractual provisions that canlimit useful life and assumptions that market participants would consider in respect of similar businesses.

Where there are indicators of impairment of individual assets, the company performs impairment tests based on fair value lesscosts to sell or a value in use calculation. The fair value less costs to sell calculation is based on available data from bindingsales transactions in an arm’s length transaction on similar assets or observable market prices less incremental costs fordisposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived fromthe budget for the next five to ten years and do not include restructuring activities that the company is not yet committed to orsignificant future investments that will enhance the performance of the cash generating unit being tested. The recoverableamount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash flowsand the growth rate used for extrapolation purposes.

Goodwill and other intangibles are disclosed in note 12.

ClaimsThe company from time to time receives claims in respect of professional service matters. It defends such claims whereappropriate and makes provision for the possible amounts considered likely to be payable, up to the deductible under thecompany’s related insurance arrangements. A different assessment of the likely outcome of each case or of the possible costinvolved may result in a different provision and cost.

Defined benefit pension schemeThe cost of defined benefit pension plans is determined using actuarial valuations. The actuarial valuation involves makingassumptions about discount rates, inflation, mortality rates and future pension increases. Due to the complexity of the valuation,the underlying assumptions and the long term nature of these plans, such estimates are subject to significant uncertainty.Further details are given in note 25.

Investment in parent undertakingManagement determines the fair value of shares bought by employees from the Employee Trust and sold by its employeesto the Employee Trust in accordance with the parent company’s Articles of Association. Management uses its judgement toverify this value is a reasonable estimate of the fair value of the parent company’s shares.

4. Principal accounting policies

Business combinationsAcquisitions of businesses are accounted for using the purchase method. The cost of the business combination is measured atthe aggregate of the fair values (at the acquisition date) of assets given, liabilities incurred or assumed, and equity instrumentsissued by the company in exchange for control of the acquiree plus costs directly attributable to the business combination.

Any excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets andliabilities is recognised as goodwill. If the net fair value of the identifiable assets and liabilities exceeds the cost of the businesscombination, the excess is recognised separately on the face of the statement of financial position immediately below goodwill.

Goodwill and intangible assetsPositive goodwill acquired on each business combination is capitalised, classified as an asset on the statement of financialposition and amortised on a straight line basis over its estimated useful life.

Goodwill acquired in a business combination is, from the acquisition date, allocated to each cash generating unit that isexpected to benefit from the synergies of the combination.


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4. Principal accounting policies (continued)

Goodwill and intangible assets (continued)If a subsidiary or business is subsequently sold or closed, any goodwill arising on acquisition that has not been amortisedthrough the statement of comprehensive income is taken into account in determining the profit or loss on sale or closure.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of theforeign operation and translated at the closing rate.

Intangible assets, including software, acquired separately from a business are capitalised at cost.

Intangible assets acquired as part of an acquisition of a business are capitalised separately from goodwill if the fair value can bemeasured reliably on initial recognition. Intangible assets created within the business are not capitalised and expenditure ischarged against profits in the year in which it is incurred, unless the asset will generate probable future economic benefits andthe costs can be reliably measured.

Subsequent to initial recognition, goodwill and intangible assets are stated at cost less accumulated amortisation andaccumulated impairment. Goodwill and intangible assets are amortised on a straight line basis over their estimated useful lives.The net book value of goodwill and intangible assets is reviewed for impairment if events or changes in circumstances indicatethe net book value may not be recoverable. The useful economic lives of goodwill and intangible assets are as follows:

Software 2 to 10 yearsGoodwill 5 to 20 years

Tangible fixed assetsTangible fixed assets are measured at cost, less accumulated depreciation and any accumulated impairment losses.

Depreciation is provided to write down the cost less estimated residual value of all tangible fixed assets over their expecteduseful lives, using the straight line method. The useful economic lives of tangible fixed assets are as follows:

Freehold buildings 50 yearsFixtures, fittings and equipment 3 to 10 yearsMotor vehicles 3 to 4 yearsLeased assets duration of lease (3 to 10 years)

Gross revenueThe term ‘gross revenue’ used in these financial statements is the same as the statutory definition of turnover contained in theCompanies Act 2006, Section 474.

Gross revenue represents the fair value of consideration receivable in respect of services provided during the year, inclusive ofdirect expenses incurred but excluding Value Added Tax. Where the company receives and disburses funds on behalf of clientsunder an agency arrangement but earns no margin, such funds are excluded from gross revenue. Similarly, disbursements areexcluded from cost of sales.

Gross revenue is recognised in the statement of comprehensive income by reference to the stage of completion of the contractat the statement of financial position date, provided that a right to consideration has been obtained through performance.

Consideration accrues as contract activity progresses by reference to the value of work performed, which coincides with costsincurred, and this is estimated by reference to costs incurred to date compared to expected lifetime costs. Hence revenuerepresents the cost appropriate to the stage of completion of each contract plus attributable profits, less amounts recognisedin previous years where relevant.

Full provision is made for losses on all contracts in the year in which they are first foreseen.


15



Gross revenue (continued)Amounts recoverable on contracts represent the excess work done to date including attributable profit over cumulative progresspayments received and receivable. Where the progress payments received and receivable exceed the value of the work done todate, the excess is shown within creditors as payments on account.

Jointly controlled operationsThe company has certain contractual arrangements with other participants to engage in joint activities that do not give rise to ajointly controlled entity. The company includes its share of the assets in such joint ventures, together with the liabilities, revenuesand expenses arising jointly or otherwise from those operations. All such agreements are measured in accordance with theterms of each arrangement.

Research and developmentResearch and development costs are charged to the statement of comprehensive income in the year that they are incurred.

Fixed asset investmentsInvestments in subsidiary undertakings are recognised initially at fair value which is normally the transaction price (includingtransaction costs). Subsequently, they are measured at cost less any provision for impairment, which approximates to fair value.

Investment in the parent undertaking, Mott MacDonald Group Limited, is measured at fair value with changes in fair valuerecognised in the statement of comprehensive income.

Cash and cash equivalentsCash and cash equivalents include cash in hand, demand deposits and other short term highly liquid investments that arereadily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

DebtorsShort term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value,net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less anyimpairment.

CreditorsShort term trade creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measuredinitially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interestmethod.

TaxationCurrent tax, including UK corporation tax, is provided on amounts expected to be paid (or recovered) using the tax rates andlaws that have been enacted or substantively enacted by the statement of financial position date.

Deferred taxationDeferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated.

Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal ofdeferred tax liabilities or other future taxable profits. If and when all conditions for retaining tax allowances for the cost of afixed asset have been met, the deferred tax is reversed.

Deferred tax is recognised when income or expenses from a subsidiary or associate have been recognised, and will beassessed for tax in a future period, except where:

l the company is able to control the reversal of the timing difference; andl it is probable that the timing difference will not reverse in the foreseeable future.


16



Deferred taxation (continued)A deferred tax liability or asset is recognised for the additional tax that will be paid or avoided in respect of assets and liabilitiesthat are recognised in a business combination. The amount attributed to goodwill is adjusted by the amount of deferred taxrecognised.

Deferred tax is calculated using the tax rates and laws that that have been enacted or substantively enacted by the statementof financial position date that are expected to apply to the reversal of the timing difference.

With the exception of changes arising on the initial recognition of a business combination, the tax expense (income) is presented either in the statement of comprehensive income or equity depending on the transaction that resulted in the taxexpense (income).

Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors. Deferred tax assetsand deferred tax liabilities are offset only if:

l the company has a legally enforceable right to set off current tax assets against current tax liabilities; andl the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the

same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, orto realise the assets and settle the liabilities simultaneously.

DividendsDividends are only reflected in the financial statements to the extent that at the statement of financial position date, they aredeclared and paid or declared as a final dividend in a general meeting.

Foreign currenciesTransactions in foreign currencies are initially recorded at the rate of exchange ruling at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at thestatement of financial position date. All differences are taken to the statement of comprehensive income.

Foreign operations which are conducted through foreign branches are accounted for in accordance with the nature of thebusiness operations concerned. Where such a branch operates as a separate business with local finance, it is accounted forusing the closing rate method. Where the foreign branch operates as an extension of the company’s trade and its cash flowshave direct impact upon those of the company, the temporal method is used.

Leasing and hire purchase commitmentsAssets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the assethave passed to the company, and hire purchase contracts are capitalised in the statement of financial position and depreciatedover the shorter of the lease term and the asset’s useful life. A corresponding liability is recognised for the lower of the fairvalue of the leased asset and the present value of the minimum lease payments in the statement of financial position. Leasepayments are apportioned between the reduction of the lease liability and finance charges in the statement of comprehensiveincome so as to achieve a constant rate of interest on the remaining balance of the liability.

Rentals payable under operating leases are charged in the statement of comprehensive income on a straight line basis overthe lease term. Lease incentives are recognised over the lease term on a straight line basis.

Employee benefitsShort term employee benefits and contributions to defined contribution pension plans are recognised as an expense in theperiod in which they are incurred.


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PensionsThe company has operated a number of pension schemes in the UK. These are described more fully in note 25.

Pension costs charged against operating profit for the defined contribution scheme are the contributions payable in respect of the accounting period.

The defined benefit scheme is now closed to future accrual of benefits and the surplus or deficit is determined by the actuary.

Scheme assets are measured at fair values. Fair value is based on market price information and in the case of quotedsecurities is the published bid price. Scheme liabilities are measured on an actuarial basis using the ‘Projected Unit’ methodand are discounted at appropriate high quality corporate bond rates. The surplus or deficit is presented separately from otherassets and liabilities on the statement of financial position, with the corresponding deferred tax asset or liability disclosed withindebtors or provisions for liabilities. A surplus is recognised only to the extent that it is recoverable by the company.

The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method, whichattributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods(to determine the present value of defined benefit obligations) and is based on actuarial advice. When a settlement or acurtailment occur, the change in the present value of the scheme liabilities and the fair value of the plan assets reflects thegain or loss which is recognised in the statement of comprehensive income during the period in which it occurs.

The net interest element is determined by multiplying the net defined benefit liability by the discount rate at the start of theperiod, taking into account any changes in the net defined benefit liability during the period as a result of contribution andbenefit payments. The net interest is recognised in the statement of comprehensive income as other finance income or cost.Remeasurements, comprising actuarial gains and losses, the effect of the asset ceiling and the return on the net definedbenefit liability (excluding amounts included in net interest) are recognised immediately in other comprehensive income or lossin the period in which they occur. Remeasurements are not reclassified in subsequent periods.

Derivative financial instrumentsThe company uses foreign exchange forward contracts to reduce exposure to foreign exchange rates. The company also usesinterest rate swaps to adjust interest rate exposures.

Derivative financial instruments are initially measured at fair value on the date on which a derivative contract is entered intoand are subsequently measured at fair value through profit or loss. Derivatives are carried as assets when the fair value ispositive and as liabilities when the fair value is negative.

The fair value of the foreign exchange forward contracts is calculated by reference to current foreign exchange forwardcontracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by calculating the presentvalue of the estimated future cash flows based on observable yield curves.


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5. Gross revenue

Gross revenue is attributable to one continuing activity, the provision of consulting services.

Gross revenue by destination:2016 2015£000 £000

Europe and Africa 493,619 477,982Middle East and South Asia 158,909 143,010Asia Pacific and Australasia 12,595 14,287Americas 9,982 7,331

675,105 642,610

6. Operating profit

This is stated after charging/(crediting):2016 2015£000 £000

Auditors’ remuneration – audit services 299 270

– non-audit services 33 61

Foreign exchange (gains)/losses (22,964) 5,283Depreciation (note 13) 4,150 4,568Amortisation of software (note 12) 96 304Operating lease rentals – vehicles and equipment 14 20

– land and buildings 12,914 12,466

7. Directors’ remuneration2016 2015£000 £000

Emoluments (excluding pension contributions) 2,718 4,821

The emoluments (excluding pension contributions) of the highest paid director were £729,428 (2015 − £1,231,312).

During the year £130,341 (2015 − £138,642) of contributions were paid to the Group Personal Pension Plan in respect of5 directors (2015 − 4), of which £nil related to the highest paid director. Some of these directors also have benefits under theclosed defined benefit section of the Mott MacDonald Pension Scheme (‘MMPS’).

During 2015, £471,950 was paid to one director on taking early retirement. There were no such payments in 2016.


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8. Staff costs2016 2015£000 £000

Salaries 320,584 294,897Social security costs 27,738 25,308Other pension costs 54,430 49,049

402,752 369,254

The average number of persons employed by the company(including directors) during the year was made up as follows:

No. No.Management 517 472Technical staff 5,241 5,038Administrative staff 854 891

6,612 6,401

The actual number of permanent staff at 31 December was: 6,578 6,654

9. Net interest receivable2016 2015£000 £000

Interest receivable:Interest due from parent undertaking 6,324 6,439 Interest due from fellow subsidiary undertakings 5,016 3,374 Other interest 135 141

11,475 9,954

Interest payable:Bank interest (928) (1,224) Interest due to parent undertaking (78) (20) Interest due to fellow subsidiary undertakings (732) (785) Other interest (54) (10)

(1,792) (2,039)

Net interest receivable 9,683 7,915


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10. Tax

(a) Tax on profit on ordinary activities2016 2015£000 £000

The taxation charge is made up as follows:Current tax:UK corporation tax 5,627 550Non-UK tax 414 846Capital gains tax – Mott MacDonald Employee Trust 149 583

6,190 1,979

Adjustments in respect of previous years:UK corporation tax (3,897) 5,342Non-UK tax 2,606 (723)Capital gains tax – Mott MacDonald Employee Trust (583) –

Total current tax 4,316 6,598

Deferred tax:Origination and reversal of timing differences 63 (229)Effect of decreased tax rate on opening balance 589 1,125Adjustments in respect of previous years 161 (40)

Total deferred tax charge (note 10(c)) 813 856

Tax on profit on ordinary activities (note 10(b)) 5,129 7,454

The aggregate current and deferred tax relating to items that are recognised as items of other comprehensive income is£3,703,000 credit (2015 − £3,362,000 credit).


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10. Tax (continued)

(b) Factors affecting tax charge for the year

The tax provided for the year is lower than the amount computed at the average rate of corporation tax in the UK of 20% (2015 − 20.25%). The differences are explained below. The average rates reflect the reduction substantively enacted on 2 July2013 from 21% to 20% with effect from 1 April 2015.

Further reductions in UK corporation tax rates, from 20% to 19% with effect from 1 April 2017, and from 19% to 17% with effectfrom 1 April 2020, were substantively enacted on 18 November 2015 and 15 September 2016 respectively. These reductionshave been taken into account in calculating the deferred tax assets and liabilities included in the statement of financial position.

2016 2015£000 £000

Profit on ordinary activities before taxation 46,975 40,720

Profit on ordinary activities before taxation multiplied by the average rate of corporation tax in the UK of 20% (2015 − 20.25%). 9,395 8,246

Effects of:Net higher tax on non-UK earnings 414 846Non-UK branch profits (1,228) (1,041)Adjustments in respect of previous years (1,713) 4,579Non-taxable income (foreign exchange gain on foreign branches) (1,409) –Non-taxable income (UK dividends received) (1,200) –Expenses not deductible for tax purposes 347 912Research and development relief (840) (877)Pension contribution and other items (2,876) (2,734)Effect of rate change 578 1,230Tax attributable to Mott MacDonald Employee Trust 149 583Other permanent differences 3,512 (4,290)

Tax on profit on ordinary activities (note 10(a)) 5,129 7,454

Adjustments in respect of previous years include the effects of changes in tax legislation or interpretations and revisions ofestimates used in establishing prior year tax provisions.

Other permanent differences include consolidation adjustments, including goodwill amortisation, as well as permanent taxreliefs and non-deductible items.

The items listed above are likely to impact on tax charges of future years as well, although their exact quantum will vary withtime and circumstances.

The company has no tax losses (2015 − £nil) that are available indefinitely for offset against future taxable profits in thosecountries in which the losses arose.


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10. Tax (continued)

(c) Deferred tax2016 2015£000 £000

The deferred tax included in the statement of financial position is as follows:Included in debtors (note 15) 19,166 19,152

The elements of deferred taxation are as follows:Excess of book depreciation over tax allowances on fixed assets 2,361 2,567Other timing differences 571 1,305Pension liability (note 25) 16,234 15,280

19,166 19,152

The movement in the year was:At 1 January 19,152 19,380Deferred tax charge recognised in income (note 10(a)) (813) (856)Deferred tax credit/(charge) recognised in other comprehensive loss– on actuarial loss in pension scheme (note 22) 3,672 3,834– on additional pension contributions made during the year (note 22) (2,380) (2,430)– due to effect of rate change on opening balance of pension scheme (note 22) (465) (776)

At 31 December 19,166 19,152

The amount of the net reversal of deferred tax expected to occur next year is £nil (2015 − £nil).

11. Dividends2016 2015£000 £000

The following dividends were paid during the year:Interim dividend paid 15,246 12,964


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12. Intangible fixed assets

2016 Goodwill Software Total£000 £000 £000

Cost:At 1 January 2,496 977 3,473Exchange adjustments – 17 17Additions – 2,9971 2,997

At 31 December 2,496 3,991 6,487

Amortisation:At 1 January 2,496 835 3,331Exchange adjustments – 5 5Provided during the year – 96 96

At 31 December 2,496 936 3,432

Net book value:At 31 December – 3,055 3,055

At 1 January – 142 142

1 During the year, £2,863,000 has been capitalised in relation to costs of development of a new IT system which had not beenbrought into use by the end of the year.


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13. Tangible fixed assets

2016 Fixtures,Motor fittings &

vehicles equipment Total£000 £000 £000

Cost:At 1 January 1,170 41,416 42,586Exchange adjustments 96 1,209 1,305Additions 52 3,912 3,964Disposals (31) (1,299) (1,330)

At 31 December 1,287 45,238 46,525

Depreciation:At 1 January 1,084 32,475 33,559Exchange adjustments 79 1,074 1,153Provided during the year 63 4,087 4,150Disposals (31) (1,299) (1,330)

At 31 December 1,195 36,337 37,532

Net book value:At 31 December 92 8,901 8,993

At 1 January 86 8,941 9,027


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14. Investments

2016 Investment Investmentsin parent in subsidiary

undertaking undertakingsat fair value at cost Total

£000 £000 £000

At 1 January 10,088 71,728 81,816Additions 10,350 – 10,350Disposals (8,940) (9) (8,949)Fair value adjustments 962 – 962

At 31 December 12,460 71,719 84,179

Amounts provided:At 1 January – 3,862 3,862Provided during the year – 2,114 2,114

At 31 December – 5,976 5,976

Net book value:At 31 December 12,460 65,743 78,203

At 1 January 10,088 67,866 77,954

The profit on disposal of shares in the parent undertaking was £nil.

The historical cost of the investment in the parent undertaking was £9,620,000 (2015 − £8,158,000).


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14. Investments (continued)

Subsidiary undertakings

A full list of subsidiary undertakings is given below:Country of

Subsidiary undertaking Controlling interest incorporation/registration2016 2015

% %

Bentley Holdings Limited 100 100 England and WalesCambridge Education Associates Limited 100 100 England and WalesCambridge Education Consultants Limited 100 100 England and WalesCCMS Software Limited 100 100 England and WalesCourtyard Group UK Limited 100 100 England and WalesFranklin & Andrews International Limited 100 100 England and WalesFranklin Osprey Services Limited 100 100 England and WalesFulcrum First Limited 100 100 England and WalesHLSP Limited 100 100 England and WalesJN Bentley Limited1 100 100 England and WalesMMG Consulting Limited 100 100 England and WalesMott MacDonald Bentley Limited1 100 100 England and WalesMott MacDonald Gas Experts Limited 100 100 England and WalesMulti Design Consultants Limited 100 100 England and WalesOsprey PMI Limited 100 100 England and WalesPower Ink Limited 100 100 England and WalesProcyon Oil & Gas Limited 100 100 England and WalesProject Management International Limited 100 100 England and Wales

1investment held wholly or partly through subsidiary undertaking


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15. Debtors2016 2015£000 £000

Trade debtors 97,308 85,483Amounts recoverable on contracts 105,435 86,358Amounts owed by parent undertaking 250,000 250,000Amounts owed by fellow subsidiary undertakings 83,627 69,835Amounts owed by other fixed asset investments 1,030 970Deferred taxation (note 10(c)) 19,166 19,152Taxation recoverable 4,240 2,782Other debtors 4,871 3,972Prepayments and accrued income 19,607 12,686

585,284 531,238

Deferred taxation is recoverable after more than one year. Amounts owed by parent undertaking and fellow subsidiaryundertakings will not be called up at short notice.

16. Creditors: amounts falling due within one year2016 2015£000 £000

Payments on account 92,276 85,438Amounts due to parent undertaking 39,773 10,935Amounts due to fellow subsidiary undertakings 36,616 26,885Amounts due to other fixed asset investments 27 27Trade creditors 12,523 11,170Current UK corporation tax 149 583Non-UK taxation 6,495 5,008Other taxes 7,610 4,783Social security 6,930 6,397Other creditors 7,160 6,955Accruals 82,765 71,114

292,324 229,295

17. Creditors: amounts falling due after more than one year2016 2015£000 £000

Unsecured bank loans (note 18) 22,000 39,800


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18. Loans

Loans repayable, included within creditors, are analysed as follows:2016 2015£000 £000

Wholly repayable within five years (note 17) 22,000 39,800

The £22.0m loan relates to amounts drawn down on the committed secured revolving credit facility which is in place until June2018 and bears a market floating rate of interest based on LIBOR.

19. Obligations under leases

Future minimum rentals payable under non-cancellable operating leases are as follows:

Land and buildings Other2016 2015 2016 2015£000 £000 £000 £000

Amounts payable:Within one yearWithin one year 11,47811,478 11,82511,825 1010 1212In two to five years 41,667 39,619 8 6Over five years 47,977 53,169 – –

101,122 104,613 18 18

20. Provisions for liabilities

Provision for losses on contracts: 2016£000

At 1 January 1,047Exchange adjustments 136Arising during the year 1,331Utilised (586)

At 31 December 1,928

21. Share capital2016 2015 2016 2015No. No. £000 £000

Authorised

Ordinary shares of £1 each 260,000,000 260,000,000 260,000 260,000

Allotted, called up and fully paid

Ordinary shares of £1 each 10,000,000 10,000,000 10,000 10,000


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22. Reserves

Profit and loss account2016 2015

Excluding Including Includingpension Pension pension pensiondeficit deficit deficit deficit£000 £000 £000 £000

At 1 January 366,702 (68,836) 297,866 299,255Profit on ordinary activities after taxation 41,846 – 41,846 33,266Dividends (note 11) (15,246) – (15,246) (12,964)Distributions to fellow subsidiary undertakings (381) – (381) (1,019)Transfer in respect of additional pensioncontributions (net of deferred tax) (11,620) 11,620 – –

Deferred tax on additional pension contributions (note 10(c)) (2,380) – (2,380) (2,430)Actuarial loss on pension scheme (note 25) – (21,600) (21,600) (21,300)Deferred tax on actuarial loss (note 10(c)) – 3,672 3,672 3,834Deferred tax rate change (note 10(c)) – (465) (465) (776)Other finance cost (net of deferred tax) 2,873 (2,873) – –

At 31 December 381,794 (78,482) 303,312 297,866

Included in this profit and loss account is an undistributable profit of £57,190,000 relating to the profit on transfer of thecompany’s investment in Mott MacDonald International Limited in 2005 to Mott MacDonald Group Limited at market value.

The pension deficit of £78,482,000 above differs from the pension liability in the statement of financial position of £95,494,000.This difference relates to the deferred tax asset of £16,234,000 in debtors plus the pre-divisionalisation element of the pensiondeficit in Multi Design Holdings Limited of £778,000.

23. Capital commitments

There were no capital commitments contracted and not provided for in the financial statements.

24. Contingent liabilities

2016 2015£000 £000

Guarantee of bank loans and overdrafts in respect of other group companies 31,966 5,088

In addition, in the normal course of business, down payment, performance and tender bonds have been given by the company.In the opinion of the directors, these are not expected to give rise to any significant liability. There are also bank guaranteesin respect of the pension scheme as disclosed in note 25.


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25. Pensions and other retirement benefits

The company has operated a number of pension schemes in the UK. The Mott MacDonald Pension Scheme (‘MMPS’) istrust based which, from 1 January 2001 until 31 December 2011, had both defined benefit and defined contribution sections.On 1 May 2000, the defined benefit section was closed to new entrants. From 1 January 2001, all members were transferredto the defined contribution section. This section was contracted into the State Second Pension, formerly known as the StateEarnings Related Pension Scheme (‘SERPS’) and was closed to new members on 31 December 2004.

From 1 January 2005, new employees were entitled to join the Mott MacDonald Stakeholder Pension Scheme, a contractbased scheme. From 1 April 2011, all Stakeholder members were transferred to the Group Personal Pension Plan (‘GPP’) andnew employees are now automatically enrolled into the GPP. The minimum GPP employeecontribution level is 4.5%.

From 1 January 2012, all defined contribution members were transferred to the GPP. Contribution structures in MMPS havecontinued in the GPP. From 1 January 2012, all active defined benefit members were made deferred by removing the salarylink and offering sliding scale enhancements to their pensions.

The company contributes to the GPP at the rates specified in the rules of the scheme. From 1 January 2014, all newemployees are contractually enrolled. To comply with auto enrolment law, all current employees who were not in the GPP werecontractually enrolled in May 2016. Total pension costs for the GPP were £34.8m (2015 − £30.4m).

Costs relating to the remaining defined benefit section of MMPS were £15.2m (2015 − £14.7m). These costs include bothadministrative expenses relating to MMPS and an instalment of £14.0m to reduce the deficit. Members’ pensions wereincreased during the year according to the rules of MMPS.

MMPS is funded by means of assets which are held in trustee-administered funds, separated from the company’s ownresources. The contributions to MMPS are determined with the advice of an independent qualified actuary on the basis oftriennial valuations using the ‘Projected Unit’ method and a funding agreement between the trustees and the company.

The following key assumptions were used to assess the funding level at the last actuarial valuation:

Date of valuation 1 January 2015

Future investment return per annum – pre-retirement Discount rate yield curve*Future investment return per annum – post-retirement Discount rate yield curve*

*This is equal to the yield on UK Government fixed interest gilts at different terms on the yield curve, with an outperformanceallowance decreasing from 2.40% p.a. to 0.45% p.a. linearly over the period from 1 January 2015 to 1 January 2024, and anoutperformance allowance of 0.45% p.a. thereafter.

At the last actuarial valuation on 1 January 2015, the market value of assets was £519m and the level of funding based onmarket value of assets was 81%. The level of funding is the value of the assets expressed as a percentage of MMPS liabilitiesafter allowing for revaluation of benefits to normal pension date.

The valuation position of MMPS was updated to 31 December 2016 by a qualified independent actuary for the purpose ofproducing these financial statements in accordance with FRS 102.

It should be noted that the calculations and methods under FRS 102 are different from those used by the actuary to determinethe funding level of MMPS. The company and the trustees regularly review the funding level of MMPS with the advice of theactuary. During 2016 minimum contributions of £14.0m were paid to MMPS. Under the current funding plan these will be £14.5min 2017, and are then predicted to increase at 3.9% per annum.


31


25. Pensions and other retirement benefits (continued)

In agreeing the latest recovery plan with the trustees of the defined benefit pension scheme, the company has agreed with thetrustees to provide a minimum security of £19m and a maximum security of £35m throughout the period of the recovery plan.

The level of security is agreed annually with the pension scheme trustees and at 31 December 2016 the level of security inplace was £35m in the form of bank guarantees which are renewable on an annual basis.

The security can be called on by the trustees in the event of the company defaulting on its contributions to MMPS or in the eventof a change in control of the company or it being placed in administration. In the view of the directors, such possible events areremote.

The assets and liabilities of MMPS as at 31 December are analysed below:2016 2015£m £m

Change in defined benefit obligationDefined benefit obligation at 1 January (592.2) (593.3)Interest cost (21.9) (20.8)Actuarial losses (87.7) (6.2)Benefits paid 32.0 28.1

Defined benefit obligation at 31 December (669.8) (592.2)

Analysis of defined benefit obligationPlans that are wholly or partly funded (669.8) (592.2)

Change in plan assetsFair value of plan assets at 1 January 507.3 518.6Interest income on MMPS assets 18.9 18.4Actuarial gains/(losses) on MMPS assets 66.1 (15.1)Employer contributions 14.0 13.5Benefits paid (32.0) (28.1)

Fair value of plan assets at 31 December 574.3 507.3

Pension liability (excluding deferred tax) (95.5) (84.9)

Deferred tax asset included within debtors (note 10(c)) 16.2 15.3

Components of pension (cost)/income

Year to 31 December 2016 2015£m £m

Interest cost on MMPS liabilities (21.9) (20.8)Interest income on MMPS assets 18.9 18.4

Net interest cost recognised in other finance cost in the statement of comprehensive income (3.0) (2.4)

Actuarial losses on MMPS liabilities (87.7) (6.2)Actuarial gains/(losses) on MMPS assets 66.1 (15.1)

Actuarial losses recognised in other comprehensive loss (21.6) (21.3)


32


25. Pensions and other retirement benefits (continued)

Components of pension (cost)/income (continued)

Plan assetsThe weighted average asset allocation at the year end was as follows:

2016 2015% %

Asset categoryLiability driven investment 58 10Diversified growth funds 37 40Equities 5 29Corporate bonds – 20Cash and other – 1

100 100

Actual return on plan assets

Year to 31 December 2016 2015£m £m

Interest income on MMPS assets 18.9 18.4Actuarial gains/(losses) on MMPS assets 66.1 (15.1)

Actual return on plan assets 85.0 3.3

The key financial assumptions used to determine the pensionliability at 31 December for MMPS are: 2016 2015

% %

RPI inflation 3.2 3.0Discount rate for scheme liabilities 2.8 3.8CPI inflation 2.1 1.9Pension increases (inflationary increases with a maximum of 5% p.a.) 2.1 1.9Salary increases n/a n/a

Weighted average life expectancy for mortality tables used to determine benefit obligations at 31 December:

2016 2015Male Female Male FemaleYears Years Years Years

Member age 60 (current life expectancy) 28.6 29.8 28.7 30.1Member age 40 (life expectancy at age 60) 29.9 31.8 30.1 30.6


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26. Related party transactions

The company has taken advantage of the provisions in Section 33.1A of FRS 102 which exempt subsidiary undertakings fromdisclosing transactions with other wholly owned subsidiary undertakings within the Group.

During the year, the company made sales of £3,285,000 (2015 − £6,503,000) to non-wholly owned fellow subsidiaryundertakings and purchases of £372,000 (2015 − £213,000) from non-wholly owned fellow subsidiary undertakings. The netbalance due from non-wholly owned fellow subsidiary undertakings at 31 December 2016 was £804,000 (2015 − £3,995,000).

27. Financial assets and liabilities2016 2015£000 £000

Financial assets at fair value through profit or loss Investment in parent undertaking (note 14) 12,460 10,088

Financial assets that are equity instruments measured at cost less impairmentInvestments in subsidiary undertakings (note 14) 65,743 67,866

Financial assets that are debt instruments measured at amortised cost1Trade debtors (note 15) 97,308 85,483Amounts owed by parent undertaking (note 15) 250,000 250,000Amounts owed by fellow subsidiary undertakings (note 15) 83,627 69,835Amounts owed by other fixed asset investments (note 15) 1,030 970Other debtors (note 15) 4,871 3,972

Financial liabilities measured at amortised cost1Trade creditors (note 16) 12,523 11,170Amounts due to parent undertaking (note 16) 39,773 10,935Amounts due to fellow subsidiary undertakings (note 16) 36,616 26,885Amounts due to other fixed asset investments (note 16) 27 27Other creditors (note 16) 7,160 6,955Loans (note 18) 22,000 39,800

There were no derivative financial instruments at the year end (2015 − £nil).

1Amortised cost is the amount at which a financial asset or financial liability is measured at initial recognition, less principalrepayments and plus or minus any unamortised original premium or discount (calculated using the effective interest method).


34

Five year summary

Years ended 31 December 2016 2015 2014 2013 2012£000 £000 £000 £000 £000

Gross revenue 675,105 642,610 579,295 547,402 526,942

Operating profit 35,444 36,020 28,029 12,433 18,395Provision for impairment of investments (2,114) (1,785) (392) (521) (1,525)Income from other fixed asset investments – 35 35 35 39Profit from disposal of investments – – – 7,010 10,769Fair value adjustments 962 935 1,182 – –Dividends received from subsidiary undertakings 6,000 – 600 521 1,200

Profit on ordinary activities before interest 40,292 35,205 29,454 19,478 28,878Net interest receivable 9,683 7,915 9,781 302 149Other finance (cost)/income (3,000) (2,400) (2,500) 2,800 3,000

Profit on ordinary activities before taxation 46,975 40,720 36,735 22,580 32,027Tax on profit on ordinary activities (5,129) (7,454) (9,690) (5,831) (5,481)

Profit on ordinary activities after taxation 41,846 33,266 27,045 16,749 26,546Dividends (15,246) (12,964) (23,255) (12,686) –Distributions to fellow subsidiary undertakings (381) (1,019) (458) – –

Retained profit 26,219 19,283 3,332 4,063 26,546

Employment of capitalFixed assets 90,251 87,123 100,862 49,145 61,703Net current assets less provisions 340,555 345,437 338,388 324,872 328,697

Excluding pension liability 430,806 432,560 439,250 374,017 390,400Pension liability (excluding deferred tax) (95,494) (84,894) (74,695) (47,001) (70,401)

Including pension liability 335,312 347,666 364,555 327,016 319,999

Capital employedCreditors falling due after more than one year 22,000 39,800 55,300 – 312Capital and reserves excluding pension liability 408,806 392,760 383,950 374,017 390,088

Excluding pension liability 430,806 432,560 439,250 374,017 390,400Pension liability (excluding deferred tax) (95,494) (84,894) (74,695) (47,001) (70,401)

Including pension liability 335,312 347,666 364,555 327,016 319,999

Net funds/(debt)Cash at bank and in hand 49,523 44,541 35,221 27,681 28,584Bank loans (22,000) (39,800) (55,300) (5,500) (5,500)

27,523 4,741 (20,079) 22,181 23,084

The years 2013 and earlier are stated under previously extant UK GAAP. However pension liability has been shown gross ofdeferred tax for those years for comparability purposes with 2014 to 2016 which have been reported under FRS 102.

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+44 (0)20 8774 [email protected] mottmac.com

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