Waterman Group Plc (LON:WTM), the international engineering and environmental consultant, saw its shares fall by 9.6% to 42.5p during the morning after it warned that full year pre-tax profits were set to come in at the lower end of expectations. In an update ahead of reporting its annual results to June 30 in October, the company said the figures would also be impacted by certain exceptional items and redundancy costs incurred during the period. In 2009, the company posted revenues of £122.4m and pre-tax profits of £2.6m.

Waterman has felt the full force of the economic downturn during the past 18 months. Historically, over 70% of its UK revenue would be from projects in the private property sector such as commercial, retail, residential, industrial and town centre redevelopments. However, last year there was a significant reduction in projects proceeding, either through planning or to construction. As a result, the company was forced to slash its overheads and consolidate international offices.

In today’s update, the company said it was pressing ahead with plans to reassess recoverability of trade receivables and unbilled amounts due on contracts with clients in Ireland. It blamed this move on a lack of progress with the release of funding from Ireland’s so called bad bank, the National Assets Management Agency (NAMA), to support developers in the country.

Elsewhere, a rationalisation of the group's office accommodation is continuing. This involves consolidating the company’s UK and Irish teams into a smaller number of multidisciplinary offices. In Central Europe, Waterman has offices in Poland, Belgium and Romania which predominantly work in the private development sector. Following recent concerns about the speed of economic recovery in the region, the company is now re-assessing the recoverability of trade receivables and unbilled amounts on contracts with clients in those countries. This will mean writing off goodwill, assets and unused office costs over the remaining terms of the leases for operations in those countries.

As a result, Waterman is set to make provisions for exceptional items of up to a maximum of £5.7m for the financial year ended June 30, 2010. The company insisted that its bankers, HSBC, had been very supportive and agreed that loan covenants would exclude the agreed final provision for these exceptional items. Net debt at the year end is anticipated to be no greater than £7.5m, down from…

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