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UK Competitor Analysis 2016

CONTACTS

Web site

E-mail

UK head office

Tel

Fax

Directors &

key contacts Sabine Hoefnagel (UK/Ireland Managing Director)

Ownership

Locations

Founded

UK VITAL STATISTICS* 2012/13 2013/14 2014/15 2015/16

Turnover, group £64.7m £73.7m £57.3m £61.2mTurnover, environmental services (inc. consulting) £64.7m £73.7m £57.3m £61.2mTurnover, environmental consulting (as defined by EA) £64.7m £73.7m £57.3m £61.2mTurnover 5-yr growth, environmental consulting 47.4% 45.2% 51.8% 43.0%Operating profit, group (UK only) £5.0m £5.0m £5.0m £5.0mNo of offices (environmental consulting) 7 7 7 8Staff, group (average for year, FTEs) 390 372 389 361Staff, environmental services (average for year, FTEs) 390 372 389 361Staff, environmental consulting (average for year, FTEs) 390 372 389 361Turnover per head, environmental consulting £165.8k £198.1k £147.3k £169.5kNo of contracts, environmental consulting (EA estimate) 2,245 2,515 2,062 2,203Average contract value, environmental consulting £28.8k £29.3k £27.8k £27.8kGLOBAL VITAL STATISTICS*

Turnover, group (gross) £640.9m £652.7m £656.8m £616.9mTurnover, environmental services (inc. consulting) £640.9m £652.7m £656.8m £616.9mStaff, group 4,576 4,598 4,716 4,650Staff, environmental services (inc. consulting) 4,576 4,598 4,716 4,650

UK ENVIRONMENTAL CONSULTANCY REVENUES CLIENT OVERVIEW

% of UK EC sales

Geographic (group EC revenues) Group revenues (UK) % of UK EC sales

Environmental Resources Management (ERM)

www.erm.com

alex.panayi@erm.com

2nd Floor, Exchequer Court, St Mary’s Axe, London EC3A 8AA

020 3206 5200

020 3206 5440

John Alexander (Global CEO),

Private (partnership model with c60% private equity stake held by Omers Private Equity/AimCo and remaining c40% by ERM staff

Global - 166 offices in 40 countries

1971 (as ERL, London)

KEY REVENUE RATIOS

£50.7£37.7

£42.8

£51.4

£64.7

£73.7

£57.3

£61.215.7%

-25.6%

13.4%

20.2%

25.7%

14.0%

-22.2%

6.8%

-35%

-25%

-15%

-5%

5%

15%

25%

35%

£0

£10

£20

£30

£40

£50

£60

£70

£80

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

% c

ha

ng

e

£m

EC revenue EC growthGovernment & agencies, 2%

Energy & utilities (inc. waste), 39%

Extractive, manufacturing & processing ,

40%

Infrastructure & Development,

2%

Financial & service sectors,

12%

Others, 5%

UK (int)3%

UK7%

Other90%

Env'l cons, 100%

Multi-nat/ FTSE 350

80%

Other20%

© Environment Analyst 2016SAMPLE PROFILE

UK Competitor Analysis 2016

REGIONAL ANALYSIS No. of EC offices RECENT EC CLIENTS

UK SERVICE AREA TURNOVER (£m) 2011/12 2012/13 2013/14 2014/15 2015/16

Air quality 0.1 0.1 0.0 0.0 0.0

Climate change & energy 1.6 2.0 0.0 0.0 0.0

Contaminated land/remediation 7.8 8.5 7.4 5.7 9.2

Ecological/landscape services 0.0 0.0 0.0 0.0 0.0

EIA & sustainable development 18.3 29.7 31.0 24.1 19.6

Environmental liabilities, risks & hazards 12.4 11.2 22.1 17.2 14.7

Environmental management & compliance 7.8 10.3 8.1 6.3 8.0

Environmental noise/vibration 0.1 0.0 0.0 0.0 0.0

Environmental/sustainability policy & strategy 3.2 2.6 1.5 1.1 3.7

Waste management/recycling 0.0 0.0 0.0 0.0 0.0

Water quality & resource management 0.1 0.0 0.0 0.0 0.0

Other environmental consultancy services 0.1 0.1 3.7 2.9 6.1

Total environmental consulting £51.4 £64.7 £73.7 £57.3 £61.2

Other environmental services 0.0 0.0 0.0 0.0 0.0

Total environmental services, inc. consulting £51.4 £64.7 £73.7 £57.3 £61.2

ENVIRONMENT ANALYST SWOT

S •

S •

W •

W •

O •

O •

T •

T •

SERVICES

ERM is focused on the provision of environmental, sustainability and risk management consulting services. Internally, services are organised around six core practices - Air Quality & Climate Change, Transaction Services, Impact Assessment and Planning, Performance and Assurance, Contaminated Site Management and Risk Management. Niche environmental services outside of EA's core EC definition include certification & verification (CVS) and environment, health & safety (EHS) information solutions and are offered through separate entities and are not included under ERM's UK operation

Respected, long-established brand association with environmental risk management going back over 40 years; one of the truly global and independent specialist environmental consulting players, present in 40 countries (strong reputation in natural resources sectors)Significant overseas element to UK EC business - twice UK industry average

Challenges associated with managing ebbs and flows in large complex infrastructure project work in respect to resourcing, utilisation and annual revenue ups and downs (as evidenced with HS2 phase one in recent years)

Lacks consulting engineering expertise unlike the majority of the top 30 peer group ---> can be challenging to win large multidisciplinary projects where clients seek a 'one-stop' shop solution (although ERM UK addresses this through willingness to work in consortia with other consultancy firms)

Further global expansion through established foothold in BRIC countries and expanding presence in Africa (Kenya and Mozambique); strengthened North Sea oil opportunities following Safety Design buy, linking to Aberdeen operations whilst 2016 JSC buy strengthens offering in chemical regulatory space (with potential to expand to other regions)

More bolt-on/niche acquisitions anticipated in support of new PE investor partners (focusing on skills serving high-impact sectors); broadened global opportunities linked to OMERS' portfolio of assets

Reputational issues (associated with controversial projects/clients)

Financial targets imposed by external investors; as a UK-headquartered firm, uncertainties and implications of Brexit going forwards

BG Group, Chevron, E.ON, ENI Agip, General Electric, Network Rail, Procter & Gamble, Rio Tinto, Shell International Petroleum Ltd, Tesco, Unilever, Scottish & Southern Energy Renewables, BP

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UK Competitor Analysis 2016

COMMENTARY

CORPORATE DEVELOPMENTS/M&A

1987

1994/96

1999

2000

2001

2002-3

2004-5

2005

2006-8

2009

2009

2009

2010

2010

2010

2011

2011

2011

2011

2012

Bridgepoint exits from partnership; majority stake (55%) acquired by another private equity firm, Charterhouse Capital Partners in deal valuing ERM at £585m (a 78% increase in its 2005 value). The remaining 45% of shares held by ERM's partners and senior management team

c8% global headcount reduction confirmed for 2009 (mainly impacting USA & Europe); pay deferral scheme (based on financial targets) introduced for partners to show leadership in response to global economic downturn. Resignation of ERM Chairman, Peter Regan

Partners US-based software firm Tririga to offer IT-based energy & GHG emissions solutions

Undertakes major global strategic review in light of global financial crisis - key elements include to focus on Master Service Agreement contracts for clients with major, long-term development programmes - particularly in high-impact industries; and incorporate sustainability principles across all services. Plus new role of acquisitions director created (filled by Julio Torti), underlining intent to make strategic M&A in support of new 'One Planet. One Company' strategy

Acquires IRC Risk & Safety (Houston, USA), c27 staff and annual turnover $4m - risk management specialist in oil & gas sector

Financial results for FY ending 31 March 2010 show 12.7% dip in global gross revenue, and a 5.4% drop in operating profit; but overall operating margin improved to 9.3% (FY2009: 8.6%). However, ERM reports return to double-digit global sales growth in Q1 (FY2010/11) and rewards staff for accepting pay freezes/cuts last year

Announces strategic partnerships with two US firms - Moore Planning Group (to focus on major planning projects in North & South America) and Integral Consulting (watershed management and contaminated sediments)

Ian Bailey (former MD of Environ) appointed managing partner for UK and Ireland, replacing Keryn James who was promoted to lead ERM's Asia Pacific business

Headline figures for FY2010/11 indicate a 12% increase in global group gross revenue (to US$681m and significant increase in operating profit to $69m, indicating a return to growth post-recession)

Acquires transport risk consultancy in UK and Hong Kong

Acquires 100-strong Oasis Environmental, Alaska-based environmental services company, focusing on oil/gas and mining sectors

MBO of retiring partners supported by private equity firm 3i in deal valuing group at £200m (3i takes 53% stake)

Acquires Enverdant (---> ERM Information Solutions) + Ecobe (S. Africa); opens Canadian office

Expands in Canada, Hawaii, Russia, South Africa, UAE

ERL (London, UK) merges with ERM (Philadelphia, USA)

Acquires Mitchell McCotter consultancy (Australia), Panzardi (Puerto Rico)

ERM Inc and ERM International become global operation

One of the sector’s founding members, ERM has been active in environmental consultancy for over 40 years and is probably the best known name in the business globally. It has earned a reputation for working at the strategic end of the market, focusing on multinational corporate clients and major international infrastructure & development projects, working for more than 50% of Fortune 500 firms. It is also one of the few big names to concentrate predominantly on environmental management consultancy. The focus for recent growth has been through organic geographic expansion and small targeted acquisitions to enhance specific capabilities. ERM has a track record of following its multinational clients into new territories and forging alliances with local consultancies as a basis for establishing new office locations. Part of its strategy in response to the global economic downturn was to focus on an even smaller number of key clients and core market sectors including mining, oil & gas, power and renewables. It is also repositioning as a sustainability risk management consultancy. ERM has won high-profile work, managing the EIAs for several Round 3 offshore wind developments as well as the High Speed 2 rail link. Other high-profile EIA work included help in securing consent for East Anglia One, one of the world’s largest offshore wind farm, for which ERM conducted the initial scoping study, co-ordinated the EIA and authored the environmental statement, as well as undertaking a number of environmental chapters for offshore environmental assessments. It worked with BP on the development of a carbon-offset calculator for use by spectators and athletes at the 2012 London Olympics. It has provided advisory services in the early design phase, project consent (including EIA/ES) and construction (including relocation of endangered species) of the East West Rail Project Phase 1, London-Oxford Parkway. In the UK, the company enjoyed strong double-digit growth between 2011 and 2014 thanks to its minimal exposure to government austerity measures and its role in M&A-related work, which covers transactions on a worldwide basis. However, FY2015 saw a sharp decline in revenue, almost exclusively linked to falling volumes in the domestic market, eg winding down of HS2-related work, further exacerbated by the change in oil price during the second half of the financial year. In contrast, work carried out by UK operation in all other regions overseas increased during that year. FY2016 sees upturn driven by work in contaminated land and remediation

Bridgepoint replaces 3i as ERM's financial partner (57% stake) in deal valuing firm at $535m (£348m: c12x EBITDA)

Offices open in Alaska, New Zealand, Romania; launches 'global knowledge-sharing platform' (Minerva) to strengthen global communications, team working and ability to serve clients operating on a multinational basisAlliance with IT firm Samsung (GHG emission data, SE Asia)

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UK Competitor Analysis 2016

2012

2012

2012

2013

2013

2013/14

2014

2014

2014

2014

2014

2015

2015

2015

2015

2015

2015

2016

2016

Opens new office in Aberdeen, focused on oil & gas sector

FY2011/12 results show 17% jump in global gross revenue to $799m and 23% hike in operating profit to $85m, with core focus industry sectors (oil & gas, mining and power) performing strongly. Acquires Vancouver-based Canadian environmental consulting firm Rescan with focus on mining (turnover: C$26m, 170 staff)

Notes: *Group financials based on results for year ending 31 March; global group figures reported by ERM in US$ and converted

by Environment Analyst based on constant exchange rate as of 31 March 2016 (US$1:£0.69469)

FY2012/13 results show 16% rise in global gross revenue to $922m whilst operating profit jumps 20% to $102 million. Results driven by double digit growth in EMEA, Asia Pacific and North America regions

Sabine Hoefnagel appointed managing partner for UK and Ireland, replacing Ian Bailey who takes on role as EMEA Regional CEO

Acquires sustainability and health, safety and environmental assets of Australian information consulting firm, Zer01 Pty Ltd

New client-led offices open in: Nairobi, Kenya; Maputo, Mozambique; Fort Collins, US

FY2014/15 results show 1% rise in global gross revenue to $945.5m and 4% rise in operating profit to $115m. Net revenue grows 5%, of which 2% is organic and remaining 3% from three acquisitions

Canada's OMERS Private Equity (OPE) and AimCo sign definitive agreement to acquire c60% stake in ERM held by Charterhouse Capital Partners in an 'off market' deal valuing group at US$1.7bn. Remaining c40% held by ERM's partners & senior management team

FY2013/14 results show 2% growth in global gross revenue to $939m and operating profit before amortisation rises 8% to $110m. Results driven by US operations thanks to increased work in the unconventional oil & gas and chemicals sectors. Headcount in the UK falls marginally during year, triggered by the current slowdown of mining projects in Africa which had been spearheaded from UK

FY2014/15 ERM UK results show 22.3% drop in turnover to £57.3m, whilst net revenue declined by 3.9% to £35.9m. Operating profit rose 6.5% to £5.0m

David McArthur appointed Director of Acquisitions

Acquires UK-based chemicals regulatory affairs consultancy JSC International Ltd, with 30 staff based in Harrogate

FY2015/16 group results show 6% decline in global gross revenue to $888m and 12% decline in operating profit to $98m. Net revenue falls 7% to $648m, but at constant currency rates, decline in net revenue is 2%. Strong growth in power, chemicals and technology helps offset declines in oil & gas

Acquires Norwegian risk management consultancy, Safety Design AS, with 20 staff servicing Norwegian based oilfield services and exploration & production companies

Acquires Natural Resource Group (NRG), 150-strong, US-based firm focused on environmental consulting, permitting and regulatory compliance with net annual revenue of $35 million

May 2014 sees refinancing of credit facilities totalling $950 million with new syndicate of lenders, led by Deutsche Bank AG and BNP Parisbas Fortis, including revolving credit facility of $50 million and an acquisitions facility of $70 million

Acquires 13-strong, Brussels-based ReachCentrum, a niche provider of REACH registration and consortium services, focused on EU regulation of chemicals and their safe use

Acquires rePlan, a c100-strong Canadian firm providing social assessment, advisory and management services to natural resource and infrastructure companies and financial institutions

ERM awarded, as part of the MTEW consortium (also including Mott MacDonald, Temple Group and WSP), the environmental and sustainability framework for London's new rail line, Crossrail 2

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