Throughout the financial year, we have continued to undertake a number of actions to invest in the future growth of the business. These have ranged from reshaping our regional management teams to focusing on areas of increasing client demand such as climate change, compliance assurance and impact assessment & planning.
Operationally, our strongest growth was in Europe, the Middle East and Africa (EMEA) and Asia Pacific: where trading profit grew by 30% and 28%, respectively. This was achieved by continuing to provide services for multinationals across these regions as well as delivering more projects for domestic clients.
In order to enhance collaboration and better share operating methodologies, our North America region was reorganized into three sub-regions: Northern, Southern and Western. After allowing for increased levels of bonuses, North America EBITA grew by 7%.
Given its wealth of natural resources and continued development, the Latin American and Caribbean (LAC) region continued to represent a key area of business activity. Brazil’s earnings returned to a level in line with those produced in the 2006 financial year.
In total, operating profit grew faster than net revenues, and the impact of this positive operational gearing raised our operating margin to above 13%. Across our practice areas we saw a 28% growth in Impact Assessment & Planning, driven ultimately by rising prices across the commodity markets. In addition, provision of risk and climate change services resulted in our Strategic Advice practice growing by 29%.
We have two fast-growing niche businesses – Information Solutions (IS), which delivers systems for gathering and using Environmental, Health and Safety (EHS) information, and the Certification & Verification Services (CVS) business. The earnings from these niche businesses grew by 19%. During the financial year we increased our ownership of IS from 60% to 80% and bought the remaining shares of the CVS business to reach 100% ownership.
Our South African business more than doubled its earnings, and we opened offices in Durban and Pretoria earlier this year. Our Eurasia business grew its earnings by 80%. A significant portion of this growth is driven by multinational corporations investing in the geographic regions serviced by these offices.
We ended the financial year with 3,597 staff, an increase of 13%, and 366 Partners, an increase of 7%. We commenced new country operations in Romania and also set up an office in Alaska. Our geographical presence was strengthened in the US, Canada, the UK, Germany and Malaysia with the opening of an additional 13 offices in these countries.
Update on Governance
The governance framework has remained similar to last year. The Board still meets six times a year with two sub-committees for Audit & Risk, and Remuneration. We welcomed Chris Busby of Bridgepoint onto the Board as a Non-executive Director in January 2008. Earlier in the financial year, Julio Torti withdrew from the Board to focus on his role as regional CEO of the growing LAC region.
We ran a competitive tender process during the year which led to a change of auditors from Ernst & Young to KPMG. On a day-to-day basis we continue, as always, to be managed by the Executive Directors, who are supported by the Senior Leadership Team and a larger group of Senior Partners. These groups consist of the Senior Executives who lead regional and country operations, business development, People development and other support functions. They generally meet two to four times a year in differing locations around the world, which enables them to meet clients and share knowledge across a variety of markets.
Summary
The financial year ended 31 March 2008 was a highly successful year for ERM both in terms of record financial performance and ongoing investment in the future growth of the business. Our employees have strongly supported this belief – 260 Partners committed US$9 million of their own money during the year in purchasing additional interests in the business via internal share offerings. This brought the total commitment by Partners over two years to some US$17 million.
Finally, we are pleased to report that trading in the first quarter of the financial year ending 31 March 2009 has been encouraging, with ERM experiencing strong growth on the equivalent first quarter of financial year 2008.
Andrew Silverbeck
Finance Director
August 2008
John Alexander
Chief Executive Officer