Half Yearly Report

Half year financial report for the six months ended 30 September 2010

Atkins reports good results in a challenging environment and is well positioned for future growth

Design and engineering consultancy group WS Atkins plc (Atkins) today announces unaudited results for the six months ended 30 September 2010.

FINANCIAL SUMMARY

Notes:

a. Comparable basis excludes transaction costs of the PBSJ acquisition in 2010 and a pension curtailment gain in 2009

b. Interim dividend declared for the six months to 30 September

c. Staff numbers are shown for continuing operations and on a full-time equivalent basis, including agency staff

d. Net funds comprise cash and cash equivalents plus financial assets and loan notes receivable less borrowings

Highlights

·; Good results in a challenging market, demonstrating resilience

·; We anticipated difficult conditions and continued to take timely action to operate in an uncertain environment, delivering improved operating margins on a comparable basis

·; We acquired The PBSJ Corporation on 1 October for $280m, giving us significant business in North America and growing the Group's headcount to around 18,500

·; A more balanced geographic footprint and targeted investment in technical skills mean that we are well positioned for medium term opportunities

·; The Board remains confident, with its outlook for the full year unchanged

Commenting on the results, Keith Clarke, chief executive, said:

"These good results demonstrate our resilience as we have continued to perform in challenging conditions. We have anticipated difficult markets and continue to take timely action to ensure we are in the best position to respond to our clients' changing needs. The scale, breadth and depth of our technical skills and our more balanced geographic footprint mean we are well positioned for future growth."

Enquiries

Notes to editors

1. Atkins

Atkins (www.atkinsglobal.com) plans, designs and enables the delivery of complex infrastructure and buildings for clients in the public and private sectors across the world. Atkins is the largest engineering consultancy in the UK and the world's eleventh largest international design firm (sources: New Civil Engineer Consultants File, 2010; Engineering News-Record, 2010).

Atkins is the official engineering design services provider for the London 2012 Olympic and Paralympic Games.

2. Attachments

Attached to this announcement are: the overview of the period, business review, finance review, statement of directors' responsibilities, the unaudited: consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of cash flows, consolidated statement of changes in equity, notes to the condensed consolidated interim financial information and the independent auditor's review report.

3. Analyst Presentation

A presentation for analysts will be held at 8.30am today at JPMorgan Cazenove, 20 Moorgate, London EC2R 6DA. Dial-in details are available from Smithfield for those wishing to join the presentation by conference call.

A webcast of the presentation will subsequently be available via the Company's website, www.atkinsglobal.com.

4. Cautionary Statement

This interim financial information has been prepared for the shareholders of Atkins, as a whole, and its sole purpose and use is to assist shareholders to exercise their governance rights. Atkins and its directors and employees are not responsible for any other purpose or use or to any other person in relation to this announcement.

The report contains indications of likely future developments and other forward-looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and business segments in which the Group operates. These and other factors could adversely affect the Group's results, strategy and prospects. Forward-looking statements involve risks, uncertainties and assumptions. They relate to events and/or depend on circumstances in the future which could cause actual results and outcomes to differ. No obligation is assumed to update any forward-looking statements, whether as a result of new information, future events or otherwise.

OVERVIEW

Results

These are good results in challenging market conditions, demonstrating our continued resilience. The Group has long anticipated difficult market conditions leading up to the UK Government Spending Review and we have taken timely action in those businesses affected by adjusting our resources in line with prospective workload. Average staff numbers were reduced by 8.6% from the same period last year, with turnover down just 5.3%.

On a comparable basis, excluding the pension curtailment gain in 2009 and transaction costs relating to the acquisition of The PBSJ Corporation (PBSJ) in 2010, the Group's operating margin rose from 6.9% to 7.3%.

As previously announced, on 1 October the Group acquired PBSJ, one of America's leading providers of engineering, planning, architecture, construction, environmental and programme management services for $280m. Our local management team has already begun to address the cost base of the business in a drive to improve its financial performance. We have also recently completed the acquisition of Danish bridge engineering company Gimsing & Madsen and entered into a strategic partnership in the Kingdom of Saudi Arabia. All of these initiatives demonstrate the continued execution of our multi-skill, multi-local strategy.

Profit before tax adjusted for the items referred to above gives a more comparable underlying profit of £41.7m (2009: £40.9m) and diluted earnings per share of 32.5p (2009: 31.6p).

The Group's balance sheet remains strong with net funds at 30 September 2010 of £279.2m (2009: £230.6m), and the cash inflow from operations for the first six months was £10.2m (2009: £38.2m).

We have reduced our headcount from 15,601 at 31 March 2010 to 15,329 at 30 September 2010 and have continued to successfully redeploy staff into different roles across the Group. In addition, we continue to invest in the training and development of our people and, in particular, in the development of a suite of carbon calculation tools to help our staff and clients deliver lower carbon projects.

Outlook

We remain confident that our good performance to date can be maintained through the rest of the year. Our recent acquisitions in the US and Denmark, along with our strategic partnership in the Kingdom of Saudi Arabia, broaden the Group's geographic spread and provide platforms for significant growth outside the UK.

Liquidity in the Middle East is slowly returning as anticipated and we remain committed to working with our clients and maintaining our long-established presence in the region.

The results of the UK Government Spending Review and the Security and Defence Spending Review were broadly as expected, although there is still some uncertainty in the market as the detail of the announcements is worked through.

In the US the transportation market remains flat, Federal spending in general is reasonably strong and we continue to see opportunities in the defence and energy markets.

We have strong work in hand, with 88% of full year forecast revenue secured (2009: 90%), and the outlook for the full year remains unchanged.

Dividend

The Board has declared an interim dividend of 9.5p per share. This represents an increase of 2.7% compared with the same period last year and demonstrates the Board's confidence in the Group's prospects. The interim dividend will be paid on 28 January 2011 to all shareholders on the register on 24 December 2010.

BUSINESS REVIEW

Design and Engineering Solutions

Design and Engineering, which comprises a broad range of complementary businesses and disciplines, has performed well in the first six months. The segment operating margin of 8.7% (2009: 6.6%) is up materially on the same period last year on revenue down 2.9%, on an average headcount down 7.4%.

Our energy business has performed well. Demand is high for our nuclear services in existing generation, decommissioning and, more recently, on the new-build programmes. We are making good progress on the International Thermonuclear Experimental Reactor (ITER) programme being built in the south of France. ITER is the next step in a global research and development programme to harness nuclear fusion to generate electricity. As architect engineer Atkins and our three joint venture partners are together providing full multidisciplinary design services for this €3bn project.

A steady oil price has seen increasing activity in the offshore oil and gas industry which has kept our teams in the UK, US and the Middle East busy. Our experience in the offshore oil and gas industry has allowed us to take a significant position in the marine renewables sector, which is a key component of the UK Government's low-carbon strategy.

Our businesses focusing on high-technology industries such as defence, aerospace and communications have delivered solid performances, notably in aerospace where we have continued to support Airbus on a number of its programmes. Communications and security remain strong market segments for our skills and capabilities.

We continue to support UK Government departments and industry on key strategic programmes. The UK Government's Spending Review largely confirmed our expectations on spending commitments and reductions, but uncertainty remains in some areas of the market. Our design business remains subject to perturbations as public sector projects are reviewed, deferred or suspended and we continue our approach of matching resources to prospective workload.

We have built on our successful relationship with the Olympic Delivery Authority and the London Organising Committee of the Olympic and Paralympic Games as the official engineering design services provider for the London 2012 Games. This multiple award winning project is a good example of the depth of multidisciplinary expertise in the Group.

Having secured good positions on the latest five-year regulatory Asset Management Programme (AMP5) our water business is seeing improved volumes of work. Although the initial build-up was at a lower rate than experienced in previous cycles, there is a substantial programme of investment required by the industry to meet the UK Regulator's settlement.

Our environmental and planning businesses saw reductions in local authority and government agency spending but continued to provide specialist advice on large projects such as Crossrail and the London 2012 Olympic and Paralympic Games and are expanding in urbanisation in developing countries, land remediation and waste management. The UK Government Spending Review confirmed the future commitment to both mitigation of, and adaptation to, climate change in the UK, as well as providing encouragement to export specialist skills developed in these areas.

Outlook

The overall outlook for Design and Engineering Solutions is good. Having flexed our resources we are well placed for future opportunities and we have 85% of our full year forecast revenue secured (2009: 88%).

Highways and Transportation

The first half of the year has been challenging, particularly in contrast to the exceptional performance in the prior year which was driven by additional design related revenues from the UK financial stimulus and major design commissions such as the M25 design, build, finance and operate (DBFO) project.

While overall revenue compares favourably with 2009, the business mix has changed with a greater proportion of revenue from our lower margin highway services business which benefitted from the new contracts in Oxfordshire and on the M25. These compensated for declining revenues in our higher margin consultancy businesses where we have experienced a reduction in demand as clients cancelled or suspended a number of existing programmes pending the outcome of the UK Government Spending Review.

During 2009, we had anticipated a weakening of the consultancy market and had already begun the process of staff reductions in the year to 31 March 2010. This has continued in the first half. Overall staff numbers reduced during the period, reflecting an intake of c. 200 staff in Oxfordshire, offset by a reduction following the end of our transport services contract with Surrey County Council, together with other staff leaving either voluntarily, through redeployment or redundancy. We will continue to redeploy and flex resources to meet anticipated demand.

In our highway services business, we started our ten-year contract with Oxfordshire County Council on 1 April and also commenced services for our new five-year contract with Somerset County Council. In September, we completed our first 12 months of operations and maintenance service delivery on the M25, which is progressing in line with our expectations.

Our design of the widening for the M25 is nearing completion and the first sections of new road have now been opened fully to traffic. We expect to complete the design of the remaining sections by the end of the calendar year. We have succeeded in being re-appointed to the Homes and Communities Agency's (HCA) multidisciplinary panel for a four-year period which provides us with a route to market not just with the HCA but also with numerous other public sector bodies.

Our transport planning and intelligent transport systems (ITS) businesses have not been immune to market uncertainties, although work on a number of large ITS commissions continues and the Spending Review presents opportunities to assist our local authority clients with their funding issues.

Outlook

Following the UK Government Spending Review announcement, it is clear that the spend in highways in the UK has been rebased to a lower level. However, it also brings some clarity and certainty to a number of client programmes. While the hiatus in projects being tendered or started in the past six months will continue to impact performance in the short term, we anticipate a gradual recovery later this financial year as clients restart projects and adjust to the new funding priorities. Our highway services business has a good order book with the first of its contracts coming up for retender in 2013. Overall our Highways and Transportation business has 90% of this year's forecast revenue secured (2009: 93%).

Rail

Our rail business has had a challenging first half with revenue down 16.3% and operating profit down 18.8% on the prior year. The market has been characterised by a delay in contractual awards coupled with fiercely competitive pricing, driven by new entrants and incumbent organisations focusing on the rail industry as other markets continue to suffer. The industry as a whole has faced significant pricing pressure, with a number of our key clients procuring solely on price. In this tough environment our margin has held up well at 6.6% (2009: 6.8%).

Our rail design and consultancy businesses have had a number of successes during the first half. The two major packages on the Edinburgh to Glasgow Improvement Programme, won at the start of the financial year, are now well underway and we have since won further elements of the programme. The design for the complex Farringdon Station for Thameslink is now complete, and we are positioning ourselves for further strategic follow-on opportunities. Our multidisciplinary design work for Chiltern Railways' enhancement programme continues against a challenging timeframe, with our work now also including the signalling design.

There is a continued high level of activity for our signalling business on projects for Network Rail. The amended Newport project is making progress with two additional interim stages and main commissioning now planned for early in the 2012 financial year. The North London Line team continue to successfully deliver an extremely complex project, a key enabler for the London Olympic 2012 transport plan. These two projects have combined contract revenue of over £100m.

Outlook

Both the UK Government Spending Review and the Sir Roy McNulty Rail UK: Value for Money Study will influence the shape and content of our longer term pipeline.

In the short to medium term, the investment outlook for our Rail business remains stable, with high technical barriers to entry for our signalling business and our proven track record in this market.

We have secured 89% (2009: 89%) of our full year forecast revenue, the same level as at the equivalent point last year, and we remain well placed to effectively support clients with our depth and breadth of multidisciplinary expertise.

Middle East

Our Middle East business has had a good first half performance. Year on year operating profit has improved by over 20%, with a number of previously provided debts being settled during the period.

As anticipated, liquidity is slowly returning to the region and steady progress continues with improving sentiment and increasing opportunities. However, even when secured, we are seeing projects taking time to mature. With delays to both new and existing jobs, we have adjusted further our resource levels to match anticipated demand and staff numbers have been reduced to 1,637 at 30 September.

Our Middle East business has a well established local presence in six primary locations in the region, centred on Dubai and Abu Dhabi. We have continued to work on projects such as the Dubai Metro and Durrat al Bahrain. The Makkah Metro project in Saudi Arabia is progressing well and we have recently entered into a strategic partnership to further strengthen our presence in the Kingdom. We are also seeing an increasing volume of public work in Oman and Kuwait.

We continue to invest in and expand our multidisciplinary expertise in the region, diversifying the business and adding skills in new areas.

Outlook

Confidence in the region is slowly returning and opportunities are increasing, although as we have previously reported, we continue to experience uncertainty over the timing of work starting on contracts that have been won. We will continue to add skills and prepare for the economic upturn. We have work in hand representing 88% of this year's forecast revenue (2009: 96%).

China and Europe

This segment consists of our design and engineering consultancy businesses in Hong Kong, mainland China and five countries across Europe: Denmark, Ireland, Poland, Portugal and Sweden.

The portfolio of businesses in this segment has performed well in the first six months of the year, with operating profit up over 25%. Staff numbers have remained stable during the period.

China

Our Chinese business continues to improve margins primarily due to its success in the buoyant Hong Kong rail infrastructure market, most notably our design work for MTRC which is progressing well. Our Hong Kong business received recognition for the quality of its work when it was presented with a Gold Quality Award by MTRC for its design on the West Island Line and Express Rail Link projects. The Hong Kong Government is still issuing a wide range of tenders and appears committed to its major infrastructure expenditure programme. With our strong position in the market, we are well placed to deliver these upcoming major infrastructure projects.

Our urban planning and architectural businesses in mainland China are performing in line with our expectations in a highly competitive, yet extremely buoyant, property market. We have secured a number of significant projects including a large scale office, shopping mall and hotel development in Zhengzhou and a large mixed use development near Chengdu. Our multiple office development in Tianjin (TEDA) is running well and the iconic Lotus hotel near Shanghai is close to completion.

Europe

Our European portfolio performed in line with expectations, maintaining revenue and margins year on year.

As in prior periods, performance has been mixed. Our Scandinavian, Portuguese and Polish businesses performed well, whereas our Irish business is yet to see signs of improvement and the outlook remains uncertain following a second quarter of negative GDP.

Our Danish business is progressing well with the Danish European Rail Traffic Management System project (ERTMS). We also continue to work on the Copenhagen Metro. In Norway we have recently started work for the Norwegian Rail Authority, delivering market and financial analysis for the Norwegian high speed rail assessment project which should run until 2012. Similarly, our Swedish business is delivering good performance on the Södertälje rail project.

We have recently announced the acquisition of the Danish bridge engineering company Gimsing & Madsen. The acquisition boosts our capability in bridge and tunnelling design and improves the Group's ability to respond to opportunities in a strong Scandinavian road and rail sector.

Outlook

There are good prospects for our rail design and infrastructure businesses in Hong Kong and continued strong demand for urban planning and architectural design in mainland China. Our Scandinavian businesses continue growing steadily, while our other European businesses still face challenging market conditions.

This segment has work in hand of 88% of forecast revenue (2009: 88%).

Management and Project Services

We have improved the operating margin in this segment to 8.4% (2009: 6.8%) on revenue down 3.0%.

Our Faithful+Gould business, which accounts for the majority of the segment's revenue, provides project management and cost consultancy services in a broad range of market sectors.

In the UK, our business continues to perform well against a backdrop of fragile economic conditions. We are beginning to experience some slowdown in the public sector opportunities, although we have balanced this with recent wins, mainly in the Higher Education sector for new residential and teaching space. We have strengthened our presence in the water sector with an appointment on the Welsh Water Framework and in the energy sector with further work for EDF. We had a number of other notable private sector wins with a variety of clients, including GlaxoSmithKline, Lloyds Banking Group, Tesco, and Coca-Cola Enterprises.

The market for our US business continues to be challenging, although there are pockets of improvement in some industries. The main issue continues to be the delays to project starts and in some cases long deferment, most evident in the US Government sector. We have been successful in converting some good opportunities, specifically in the aviation sector in Newark and LaGuardia.

Our Asia Pacific business completed a number of major projects for REC and Shell in Singapore and the half year closed with the business securing some very good projects across the region.

Our management consultancy business, which is predominantly in the UK, continues to perform well in its core business of ICT enabled business change. It has a strong position within the UK public sector and remains on all the major frameworks into central and local government.

Although some slowdown in the public sector has been noted, we remain focused on reducing costs and maintaining the correct staffing levels, while at the same time delivering innovation.

Outlook

We are pleased to have extended our work in hand to 92% of this year's forecast revenue (2009: 86%).

While there has been a recent slowdown in the UK public sector, the business is well placed to deliver key projects that will help achieve the reform and cost reduction required across a variety of both public and private sector clients.

Asset Management

Contracts in our Asset Management business are performing to our expectations.

Revenue was down 20.5% over the prior period following the conclusion of one of our major contracts and the exit of a PFI maintenance contract during the previous financial year, as previously reported.

Our managing agent business is focussed on retaining existing business and growing organically through strong client relationships, specifically with the Home Office, Lloyds Banking Group UK and the Metropolitan Police.

Our managing contractor business continues to focus on compliant delivery and robust financial management and is delivering results in line with expectations.

Outlook

This segment has work in hand of 81% of forecast revenue, representing a similar level to the prior year (2009: 82%).

FINANCE REVIEW

The revenue and operating profit for the six months to 30 September 2010 are discussed in the preceding Business Review.

Taxation

The Group's effective normalised tax rate on continuing operations was 24.0% (2009: 22.0%), lower than the standard rate of corporation tax in the UK of 28%, reflecting the continued proportion of the Group's profits earned in lower tax rate jurisdictions, over provision in prior years and the impact of R&D tax credits. The Group's effective normalised tax rate will change going forward following the acquisition of PBSJ.

A number of changes to the UK Corporation tax system were announced in the June 2010 Budget Statement, including the reduction in the main rate of Corporation tax from 28% to 24% over a period of four years. The initial reduction to 27% has been enacted at 30 September 2010 and has therefore been taken into account in the effective tax rate calculations.

Pensions

Pension Costs

The cost of the Group's defined benefit pension schemes for the six months to 30 September 2010 amounted to £10.9m (2009: £7.9m). The charge for the six months to 30 September 2009 included the benefit of a one-off curtailment gain of £2.6m in respect of the Railways Pension Scheme.

Funding

The latest actuarial valuation of the Group's principal defined benefit scheme, the Atkins Pension Plan (the Plan), was carried out as at 1 April 2007. This valuation indicated that the Plan had an actuarial deficit of approximately £215m. Cash contributions of £114m were made up to 31 March 2010 to fund the deficit, with the Group committed to contributing £32m per year until 2014. As a consequence, total deficit funding contributions paid in the six months to 30 September 2010 amounted to £16m. The next actuarial valuation will take place as at 1 April 2010 and is likely to be completed in early 2011.

The defined benefit section of the Plan is closed to future accrual of benefit for members who do not enjoy a statutory or contractual right to a final-salary pension. While closed to future accrual, the link to final salary has been retained.

On 1 September 2009 the terms of the Atkins section of the Railways Pension Scheme were amended in respect of the future benefits offered by the scheme. Under the amended terms members were offered the choice of retaining their current benefits in return for higher contributions or receiving future benefits linked to their salary at 1 September 2009 with future increases capped at inflation. A curtailment gain of £2.6m was recognised in the six months to 30 September 2009 as a result of some members electing to cap their future pensionable salary increases.

IAS 19

The IAS 19 post-tax retirement liability of the Group's pension schemes is estimated at £342.1m (30 September 2009: £301.6m; 31 March 2010: £317.1m). Although the value of the schemes' assets increased substantially in the six months to 30 September 2010, the IAS 19 deficit increased by £28.3m principally due to the decrease in the discount rate used from 5.5% to 5.1%.

The key assumptions used in the IAS 19 valuation and their sensitivities are detailed in note 15 to the condensed consolidated interim financial information.

Earnings per share (EPS)

Diluted EPS reduced by 14% to 29.5p (2009: 34.3p) primarily as a result of the reduction in the Group's profit before tax of 11%, together with an increase in the effective tax rate.

Basic EPS from continuing operations for the period was 30.2p (2009: 34.8p).

Net funds

Net funds are analysed as follows:

The Group's treasury policies and financial risk management remain as described in the annual financial statements for the year ended 31 March 2010. In addition to the net funds above, the Group has £17.3m (2009: £58.8m) of undrawn committed borrowing facilities available to fund its operations as disclosed in note 14 to this condensed consolidated interim financial information.

The increase in the borrowings relates to the loan drawn down to fund the acquisition of PBSJ on 1 October 2010.

Cash flow

Cash generated from continuing operations was £10.2m (2009: £38.2m) and can be summarised as follows:

Risks

The Group considers strategic, financial and operational risks and identifies actions to mitigate those risks. Key risks and their mitigation have not changed in the period from those disclosed on page 34 of the annual financial statements for the year ended 31 March 2010, namely:

·; Competition in all of its markets

·; Changes to the contracting environment

·; Matching staff levels to workload

·; Project management of our own and clients' projects

·; Defined benefit pension funds and a growing deficit

·; Market position and reputational risk

·; The health and safety environment

·; Data security

·; Recruiting and retaining high-calibre staff

·; Crisis events

·; Global political, economic, legal and regulatory risks associated with working in various countries.

We remain vigilant to these potential risks, in particular the impact of the continuing recessionary and liquidity issues in our major markets.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34, as adopted by the European Union, and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

The directors of WS Atkins plc are disclosed in the Annual Report for the year ended 31 March 2010.

By order of the Board

Richard Webster

Company Secretary

25 November 2010

Consolidated income statement for the six months ended 30 September 2010 (unaudited)

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Consolidated statement of comprehensive income for the six months ended 30 September 2010 (unaudited)

Items in the statement above are disclosed net of tax.

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Consolidated balance sheet as at 30 September 2010 (unaudited)

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Consolidated statement of cash flows for the six months ended 30 September 2010 (unaudited)

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Consolidated statement of changes in equity as at 30 September 2010 (unaudited)

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Notes to the condensed consolidated interim financial information for the six months ended 30 September 2010 (unaudited)

1. General Information

WS Atkins plc is a public limited company incorporated and domiciled in England with company number 1885586. The Company has its primary listing on the London Stock Exchange.

Copies of this half year report are available from the registered office: Woodcote Grove, Ashley Road, Epsom, Surrey, KT18 5BW, England, and may be viewed on the Atkins website www.atkinsglobal.com.

This condensed consolidated interim financial information was approved for issue on 25 November 2010.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2010 were approved by the Board of directors on 16 June 2010 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

This condensed consolidated interim financial information has been reviewed by our auditor, but not audited, and its review report is included.

2. Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 September 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2010, which have been prepared in accordance with IFRSs as adopted by the European Union.

3. Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2010, as described in those annual financial statements.

Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual earnings, excluding the effect of the acquisition of The PBSJ Corporation. The Group's effective normalised tax rate will change going forward following this acquisition.

(a) New and amended standards adopted by the Group

·; IFRS 3 (revised), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009.

The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared to IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related costs are expensed.

As the Group has adopted IFRS 3 (revised), it is required to adopt IAS 27 (revised), 'Consolidated and separate financial statements', at the same time. IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses.

The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. There has been no impact of IAS 27 (revised) on the current period, as there are no material non-controlling interests. There have been no transactions whereby an interest in an entity is retained after the loss of control of that entity; there have been no transactions with non-controlling interests.

(b) Standards, amendments and interpretations to existing standards effective in 2010 but not relevant to the Group

·; IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the Group, as it has not made any non-cash distributions.

·; IFRIC 18, 'Transfers of assets from customers', effective for transfers of assets received on or after 31 October 2009. This is not currently applicable to the Group, as it has not received any assets from customers.

·; 'Additional exemptions for first-time adopters' (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer.

·; Improvements to the International Financial Reporting Standards 2009 were issued in April 2009. The effective dates vary standard by standard but most are effective 1 January 2010.

(c) The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not yet effective and have not been early adopted:

·; IFRS 9, 'Financial Instruments', issued in December 2009.

·; Revised IAS 24, 'Related party disclosures', issued in November 2009.

·; 'Classification of rights issues' (Amendment to IAS 32), issued in October 2009.

·; 'Prepayments of a minimum funding requirement' (Amendments to IFRIC 14), issued in November 2009.

·; IFRIC 19, 'Extinguishing financial liabilities with equity instruments'.

·; Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The effective dates vary standard by standard but most are effective 1 January 2011.

4. Segment information

The chief operating decision-maker has been identified as the chief executive and the Group finance director. The chief executive and the Group finance director review the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The chief executive and the Group finance director assess the performance of the operating segments based on operating profit before interest and tax. Information provided to the chief executive and the Group finance director is measured in a manner consistent with that in the financial statements.

Unallocated assets consist primarily of goodwill, deferred tax and UK cash and cash equivalents.

Total segment revenue excludes the share of Joint Venture revenue earned from centrally managed Joint Ventures of £4.1m (30 September 2009: £6.2m; 31 March 2010: £12.1m).

The £3.0m unallocated central item reported in the six months ended 30 September 2010 relates to acquisition costs arising on the purchase of The PBSJ Corporation. These costs are expected to be around £8m at the year end (note 12).

The £2.6m unallocated central item reported in the year ended to 31 March 2010 and six months ended 30 September 2009 relates to a curtailment gain resulting from changes made to future benefits receivable on the Railways Pension Scheme (note 15).

Reconciliation of segmental analysis to profit for the period attributable to owners of the parent:

The £0.1m profit on disposal of Joint Venture in the year ended 31 March 2010 is attributable to the Highways and Transportation segment.

5. Profit on disposal of Joint Venture

On 5 March 2010 the Group disposed of its holding in Transactions Systems Limited generating a profit on disposal of £0.1m.

6. Discontinued operations

In the prior year, following the expiry of a letter of credit issued in respect of the Metronet Enterprise (which went into PPP administration on 18 July 2007) the Group released a related provision and a one-off, non-cash credit of £25.0m was reflected in the Group's full-year income statement to 31 March 2010. There was no related tax charge.

7. Share of post-tax profit/(loss) from Joint Ventures

8. Net finance cost