Sale and Leaseback of Pickfords Wharf

Waterman Group plcSale and Leaseback of Pickfords Wharf

Waterman Group plc ("Waterman", the "Company" or the "Group"), the international engineering and environmental consultant, is pleased to announce that it has entered into a conditional agreement (the "Agreement") to dispose of its freehold property, Pickfords Wharf, Clink Street, London SE1 9DG (the "Property"), to GMS Estates Limited (the "Disposal"). The Consideration for the Disposal will be approximately £11.91 million payable in cash on Completion. A deposit of approximately £1.19 million on account of the Consideration was paid by GMS Estates Limited to the Company on entering into the Agreement. 

In view of its size, the Disposal constitutes a class 1 transaction for the purposes of the UKLA Listing Rules and Completion is therefore conditional on approval by Shareholders at a General Meeting. Accordingly, the Company today expects to send a circular to Shareholders setting out further details of the Disposal (the "Circular") and a notice of the General Meeting which will be held at the offices of Evolution Securities Limited at 100 Wood Street, London EC2V 7AN at 9 a.m. on 10 November 2011. The Company expects that Completion of the Disposal would take place within 5 business days after Shareholder approval is obtained at the General Meeting.

On Completion, the Company will be granted an overriding lease by GMS Estates Limited of the office and commercial premises in the Property for a term of 15 years with the Company benefiting from an option to terminate after 10 years (the ''Lease''). The rent payable under the Lease will be approximately £0.68 million per annum and is subject to review on an upwards only basis at the expiry of each fifth year of the term to the then prevailing open market rent.

The Company will continue to occupy the office premises and receive rental income from commercial premises. The Lease requires GMS Estates Limited to maintain the structure of and insure the Property with the Company paying a fair and reasonable proportion of the costs to GMS Estates Limited in so doing.

Background to and reasons for the Disposal

Waterman is an international engineering and environmental consultancy. It has no business in real estate investment. The Company originally acquired the Property in 2001 for a consideration of £7.51 million and relocated the Company's head office to the Property in June 2002 following refurbishment. The Property was subsequently revalued at £7.75 million in July 2004 following the introduction of IFRS accounting. Since its acquisition by the Company, the value of the Property has increased slightly and has a current market value of £7.81 million, as set out in the valuation report in the Circular. These two valuations are based upon the Red Book standard in accordance with the recommendations of the Royal Institution of Chartered Surveyors on the basis that the Property is vacant at the time of any sale. Earlier this year, the Board decided to market the Property for sale. There have been a number of expressions of interest from potential purchasers but the Buyer's proposal represents the best offer received by the Company to date and in the Board's view an attractive one.

Use of proceeds

The net proceeds from the Disposal after transaction costs of approximately £0.32 million, are expected to amount to approximately £11.59 million and the Board currently intends to use these to:

·; pay capital gains tax due to HMRC from the Disposal, which the Company has estimated will

be approximately £0.51 million;

·; repay in full the mortgage on the Property and associated early repayment charge which

together amount to approximately £4.09 million; and

·; repay approximately £3.52 million of term loans with HSBC including repayment in full of the 2006 Loan and the 2003 Loan and a repayment of approximately £1.73 million of the 2007 Loan. Following which the Company will have a single term loan with HSBC, being the 2007

Loan, with a principal balance of approximately £2.27 million.

It is anticipated that following the above payments, the Company will receive approximately £3.47 million net cash from the Disposal. The net cash will reduce the Group's net debt and increase covenant headroom within the Group's banking facilities, which it is anticipated will provide the Group with greater flexibility to reinvest in its core consultancy business.

The Property has a book value of approximately £7.45 million (the freehold book value of the Property is approximately £7.36 million and the book value of the certain assets relating to the Property's lift is approximately £0.09 million) and therefore a profit before tax of approximately £4.46 million (before transaction costs of approximately £0.32 million) will arise on Completion. The proposed use of proceeds will result in a reduction in capital repayments and interest costs associated with Group's debt (as set out above), which in the last financial year, would have resulted in reductions of approximately £0.8 million and £0.4 million respectively. The rent payable for the leaseback of the Property by the Company will be approximately £0.68 million per annum. Had the Disposal occurred on 1 July 2010, the commencement of the Group's last full financial year, the earnings of the Group would have been reduced. The Disposal would have increased the Group's net assets by approximately £4.14 million had it occurred on 30 June 2011.

The Company will make a further announcement once the Circular (including the Notice) has been posted to Shareholders (which is expected to be later today).

Terms defined in this announcement shall have the meaning ascribed to them in the Circular unless otherwise stated.

Nick Taylor, Chief Executive of Waterman, commented on the Disposal:

"The sale and leaseback of Pickfords Wharf is a positive event as it significantly reduces debt, increases cash reserves and strengthens Waterman Group's balance sheet."

18 October 2011

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