09
UK PLC
Annual Report and Accounts 
FW Annual Report 09 Cover:Layout 2  29/1/10  13:00  Page 1  
 
 
 
CONTENTS 
 
 
 Page 
 
Financial and operational highlights 2 
  
Chairman’s statement 3 
 
Chief Executive’s Review 5 
 
Board of Directors 8 
  
Directors' report 9 
 
Statement of directors' responsibilities 14 
 
Independent auditors' report 15 
 
Consolidated income statement 17 
 
Consolidated balance sheet 18 
 
Company balance sheet 19 
 
Consolidated statement of changes in equity  20 
 
Company statement of changes in equity 20 
 
Consolidated cash flow statement  21 
 
Company cash flow statement  22 
 
Notes to the financial statements 23 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  FRESHWATER UK PLC 
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FINANCIAL AND OPERATIONAL HIGHLIGHTS 
FOR THE YEAR ENDED 31 AUGUST 2009 
 
 
Financial highlights 
         2009   2008 
• Turnover        £9.07m  £9.52m 
• Revenue (gross profit)      £6.70m  £7.51m 
• EBITDA+       £0.61m  £1.40m 
• Profit before income tax     £0.24m  £1.17m 
• Net cash flow from operating activities    £0.41m  £1.00m 
• Basic earnings per share      1.53p    6.26p 
• Proposed final dividend per share     0.5p     1.5p 
• Total dividend for the year       1.25p   3.0p  
• Placing successfully raised £0.47m before costs in June 2009 
 
+   Earnings before interest, taxation, depreciation and amortisation 
 
Operational highlights 
 
• Successfully integrated prior-year acquisitions (Lynx, Waterfront and Merlin) and settled all earn-out 
liabilities 
• Acquired Life Communications, a Belfast and Dublin based PR agency, on 1 July, 2009 
• Provided services to 345 clients across the UK with only three accounting for more than 3% of revenue 
(National Grid – 8.4%, QVC – 4.4%, Environment Agency – 3.8%) 
• Selected for a large number of public sector rosters for the first time 
• Delivered a comprehensive cost reduction programme, resulting in ongoing savings of more than £1.4m  
• Reduced employee count by 24% from 123 to 94 during the year  
• Restructured group board, reduced in number from eight to five 
• Moved all London-based staff into one office in June 2009, as part of the cost savings programme 
• Named the number one regionally-based agency by the PR industry’s leading trade journal  FRESHWATER UK PLC 
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CHAIRMAN’S STATEMENT 
FOR THE YEAR ENDED 31 AUGUST 2009 
3 
 
As we report our ninth consecutive year of profitable trading, the financial results demonstrate that we have 
been resilient in the recession while positioning ourselves to benefit from our competitive advantage and any 
recovery in specific sectors.  
 
A year that saw the failure of a number of banks, a global financial crisis and the onset of recession was never 
going to be easy for business generally. 
 
Thanks in no small part to the diversity of our client base, we have remained profitable after successfully 
realigning our income towards robust sectors, such as transport, health and energy, where stakeholder 
communications is often a statutory requirement.  At the same time, we have worked to retain a presence in 
cyclical sectors, such as property and consumer, the revenues from which could grow as circumstances 
improve.   
 
We have lowered our cost base which will enable modest revenue increases to generate improved profitability, 
as we saw in the fourth quarter which was by far the best of the year. 
 
While our main focus has been on delivering profitable trading in the existing business, we were able to extend 
our geographical reach to Belfast and Dublin by acquiring Life Communications on 1 July 2009 using funds 
from a Placing, which raised £0.47m. 
 
Our trading has continued to generate cash and all the earn-out obligations from acquisitions made prior to the 
current year have been fully settled. 
 
Financial Review 
 
Though remaining profitable, the group saw its revenue decline by 11% in the year to £6.70m (2008: £7.51m). 
Apart from public affairs and the NHS-focused healthcare division, all parts of the business experienced lower 
revenues in the year. 
  
In the consumer, housing, technology, conference and training sectors, decreases in revenue were caused by 
the downturn in the economy generally. However, in the energy sector, lower-than-expected revenue was 
caused by operational delays to some substantial contracted projects that were due to start in the final quarter. 
These projects have now started and will help underpin trading in 2009-10. 
 
We are encouraged by a 20% increase in revenue in our creative and marketing services division in the 
second half, bringing it back – after a poor first half - to the trading levels achieved in 2007-08. This partly 
reflected greater cross-selling, particularly by the healthcare team, which secured a number of substantial 
projects for NHS clients. We have decided to retain the Merlin brand for this part of the business, both to 
distinguish it from Freshwater’s core PR and public affairs proposition and to take advantage of the name’s 
goodwill value in Wales. 
 
The group began to align costs with the new economic realities as soon as the scale of the economic 
downturn became clear. Staffing levels were reduced from 123 (117 full time equivalents, ‘fte’) in September 
2008 to 94 (85 fte) in August 2009 (excluding Life Communications). We also moved all London-based staff 
into one office in June 2009, deferred the annual salary review, reduced the size of the board from eight to five 
and cut discretionary spending. 
 
The cost reduction programme will deliver annualised savings of more than £1.4m, but the benefits have come 
through gradually and will not be fully felt until the second quarter of 2009-10. Further cost savings 
implemented recently will benefit the second half of the year. 
 
The reduction in revenue ahead of comparable cost savings led to a 56% decrease in EBITDA to £0.61m 
(2008: £1.40m) and a 79% decrease in net profit before income tax to £0.24m (2008: £1.17m). 
 
However, profitability was better in the second half than the first and the EBITDA margin reached 16% in the 
final quarter (2008: 19%).  Basic earnings per share were 1.53p (2008: 6.26p). 
 
 
  FRESHWATER UK PLC 
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CHAIRMAN’S STATEMENT  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
4
Financial Review (continued) 
 
The effective tax charge of 14% of profit before income tax (2008: 36%) was in line with our expectations and 
the result of the Group benefiting from a revision to its prior year tax charge and certain tax losses that 
previously were unable to be recognised under accounting rules.  
 
Total borrowings at the year end were £0.85m, down from £1.04m at the end of the previous financial year. 
We also achieved a positive operating cash flow of £0.41m through profitable trading and strong working 
capital control, which led to a substantial reduction in the relative level of debtors. We had no significant bad 
debt issues during the year. 
 
In addition, we have now consolidated our position on 34 supplier frameworks, including several COI and NHS 
rosters, and are seeing a steady flow of new business opportunities as a result.   
 
Dividend 
 
The board proposed a final dividend of 0.5p, which when added to the interim dividend of 0.75p, made a total 
dividend for the year of 1.25p (2008: 3.0p).  At this level, the total dividend is covered 1.1 times (2008: 2 
times). The dividend was paid on 5 January, 2010 to shareholders on the register on 27 November, 2009. 
 
Board and employees 
 
I would like to express my appreciation to my immediate predecessor, Baroness Cohen of Pimlico, who 
stepped down on 12 February 2009.  Lady Cohen served on the board for two years, contributing invaluable 
experience as we took Freshwater on to AIM and established ourselves as a listed company. 
 
Another former Chairman, Bart Haines, an early stage investor in the business and a non-executive director 
for five years, retired from the board on the same date.  We are grateful to Bart, who served as Chairman for 
two years, for the corporate experience he brought to the company as a former senior executive of Dow 
Corning. 
 
I would also like to thank David Howell, another private investor in the business, who stood down from the 
board on 11 June 2009 after five years. David served as Chairman prior to Bart and has played a key role in 
developing the group’s strategy, drawing on his own business experience in consultancy and commercial 
property. 
 
In June, Edward Carter switched from an executive to a non-executive director role, including the 
chairmanship of the Audit Committee.  Edward, who is a Chartered Accountant and former Ernst & Young 
partner, joined the board having been the managing director of one of the businesses that we acquired in 
2005.   
 
Finally, I would like to express my personal thanks to all our employees, who have worked tirelessly and 
effectively through the most challenging of circumstances.They have demonstrated their ability to cope with 
difficult economic times and I am convinced that they form an excellent team as we move forward in 2009-10. 
 
Outlook 
 
The recession has undoubtedly had an impact on Freshwater’s ability to deliver profitable growth and as a 
result of the impact of the economic climate on the Company’s trading performance, the Board has decided 
that it will undertake a strategic review that will include consideration of a number of options for the future 
development of the business.  
 
However, we have a sound platform for the future with strong revenue opportunities and an efficient cost 
structure.  After a slow start to 2009-10, we have seen continued strengthening of our order book both 
involving new clients and additional work from existing clients. With a combination of that improvement and the 
operational efficiencies that have been implemented, if there is no deterioration in the UK economy, I expect to 
be in a position to report further progress in respect of the current financial year. 
 
Marie-Louise Windeler 
Chairman 
2 February 2010  FRESHWATER UK PLC 
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CHIEF EXECUTIVE’S REVIEW  
FOR THE YEAR ENDED 31 AUGUST 2009  
5 
 
The group has proved its strength and resilience by maintaining healthy revenue levels in most of its markets 
while implementing a comprehensive cost reduction programme. As a result, we achieved a significant 
improvement in profitability in the second half.  
 
We are pleased to report that 2008-09 also saw the successful completion and settlement of the earn-outs 
relating to acquisitions made in 2007-08, the delivery of positive operating cash flow, a reduction of borrowings 
from £1.04m to £0.85m, a Placing, which successfully raised £0.47m and the acquisition of Life 
Communications in Belfast and Dublin. 
 
Freshwater’s diverse client base, wide range of specialisms and extensive geographical reach continue to be a 
source of strength and competitive advantage, helping the group meet the challenge of difficult market 
conditions. 
 
During 2008-09, we made considerable progress in combining different elements of our regional-specialist 
offering to win additional business. Notable examples include: 
 
• Work for National Grid expanding from Leeds to Glasgow, Sheffield and Birmingham 
• PR support for John Lewis shop openings in Cardiff, Leicester, Poole and Stratford  
• Stakeholder communications activity for E.On in Bristol, Sheffield and County Durham 
• Our first public affairs brief in the health sector 
• Appointment by bed retailer Dreams to handle four store openings 
• PR and public affairs support for High Speed Rail, a consortium of eleven local authorities 
• The launch of the National Blood Service’s ‘blood buddies’ campaign 
• NHS new business wins in Wales and the North West 
• A multi-office PR campaign for Morgan Technical Ceramics 
 
We now have a model for creating combined regional-specialist teams that involves developing expertise 
across the regions linked to the relevant specialist division. These ‘extended specialist networks’ apply to work 
for energy, NHS and technology clients and are now being introduced in public affairs and consumer. The 
group has always had some specialists in the regions but this approach, incorporating training and 
placements, is expanding and deepening the skills base of the business. 
 
The group provided services to 345 clients in 2008-09. We continue to see growth from our larger clients as 
we focus on broadening our relationships with them.  At the same time, the recession has led to a reduction in 
the number of clients spending £5,000 or less annually with us, mainly because of a drop in demand for lower 
value services such as media training. While we expect to see an increase in the latter as the economy 
recovers, we view the former as an integral part of our strategy and are pleased the number of clients 
spending £100,000 or more with us has increased from nine to 12. The three largest clients were National Grid 
– 8.4% of revenue, QVC – 4.4% and Environment Agency – 3.8%. 
 
The revenue from each sector in 2008-09 was as follows (prior year in brackets): 
 
• Public sector     22% (17%) 
• Transport     20% (12%) 
• Consumer/retail    18% (23%) 
• Energy      11% (11%) 
• Professional and business services   9% (12%) 
• Housing and property        8% (12%) 
• Industry and technology       7% (7%) 
• Education         3% (3%) 
• Others          2% (3%) 
 
Public sector revenue grew 15% to £1.47m mainly due to an increase in work for the Environment Agency and 
in the NHS. Other public sector clients include the Welsh Assembly Government, the Welsh Local Government 
Association, the London Probation Service and a consortium of five district councils in Norfolk. 
 
  FRESHWATER UK PLC 
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CHIEF EXECUTIVE’S REVIEW  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
6 
 
Transport was our second largest sector as a result of a full year contribution from Waterfront, the public 
affairs business acquired on 1 December, 2007. Now rebranded Freshwater Public Affairs, the division had a 
good year, contributing six of the group’s top 12 clients – Deutsches Bahn, Bristol Port Company, Mersey 
Travel, Port of Tilbury, the Association of Train Operating Companies and the Civil Aviation Authority. 
 
In the energy sector, stakeholder communications support provided to our largest client, National Grid, 
continues to develop across the group. Our Glasgow office successfully carried out its first community 
engagement project for National Grid, communicating with affected stakeholders about gas transmission 
infrastructure works at Drumshangie, near Airdrie.  Our Sheffield office is advising residents and businesses in 
the city about electricity transmission cable replacement. Our Birmingham office is helping to provide 
community relations support to National Grid Property, the division responsible for the remediation of former 
gas works. Meanwhile, our Leeds office has played a key role in informing and consulting affected 
communities in the North East about major overhead electricity line up-rating activity required to transfer to 
England renewable power generated in Scotland, which has now been approved by the relevant local 
authorities and the Department of Energy and Climate Change. The group has also embarked upon the first 
phase of challenging long-term consultation activity required in the north of England, to enable National Grid to 
build high-voltage electricity connections and infrastructure for the next generation of nuclear power stations. 
           
Though revenue from clients in the consumer, property and professional services sectors has decreased, we 
still see these as important markets with potential for recovery and growth. We also have a healthy client 
portfolio in industry and technology, shared mainly between a specialist PR team and Merlin Creative and 
Marketing. 
 
Education is another sector with potential for growth, building on specialist expertise we are developing 
through work for clients such as University of Wales Lampeter, Sheffield Hallam University, Neath Port Talbot 
College and Coleg Gwent.     
 
The acquisition of Life Communications, which contributed two months trading in the year under review, has 
brought into the group a number of new clients including Pepsico, Walkers Snacks and Gala stores. 
 
Waterfront Conference Company, which was acquired in December 2007, faced the same acute difficulties as 
other businesses in the conference market, which suffered from wholesale cuts in discretionary spending. 
After a thorough review, we decided to retain the Waterfront name, rather than rebrand to Freshwater, and 
build on its reputation for high quality policy conferences in areas such as transport, planning and energy. The 
division has entered into 2009-10 with a much lower fixed cost base, an attractive programme of events and a 
flow of bookings that gives us confidence there will be a return to profit in the first half. 
 
The reduction in staffing levels helped the group maintain a healthy level of revenue per fte of £68,001 (2008: 
£69,130). We expect to see an increase in revenue per head in 2009-10 as agreed cost savings take effect 
and through organic growth in some sectors. 
 
Strategy 
 
Freshwater is not basing its strategy on a belief that a recovery will come early. Though we are well-placed to 
benefit as and when the economy improves, our focus is on continuing to develop our integrated regional-
specialist model and build a modern communications business that will, through competitive advantage, 
achieve a larger market share, whatever the circumstances. 
 
We will also continue to leverage the potential of our broad client base and develop new business in those 
sectors and specialist disciplines with the best prospects for growth. This includes meeting the needs of clients 
for whom communication with stakeholders is a legal requirement, often funded from capital budgets. It also 
includes honing our offering in newer areas of activity such as digital media and social marketing. 
 
 
 
 
 
 
 
  FRESHWATER UK PLC 
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CHIEF EXECUTIVE’S REVIEW  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
7
Outlook 
 
The economic environment remains challenging, but the action we have taken to reduce costs and increase 
our focus on relatively stable sectors has given us a robust platform.   
 
We believe our revenue from energy, transport and health sectors will continue to be strong through the next 
12 months, and we are well placed to benefit from any improvement in consumer, property and technology.  
 
Revenues this year will also be helped by a number of significant contracts that were delayed in the final 
quarter. These delays also affected the first quarter but the projects have now started and will help the rest of 
the year. 
 
This, together with the impact of costs savings, gives us cause to view the immediate and long term future of 
the Company with confidence. However in the light of the impact of the economic climate on the Company’s 
trading performance, the Board has decided that it will undertake a strategic review that will include 
consideration of a number of options for the future development of the business. 
 
 
Steve Howell  
Chief Executive 
2 February 2010 
 
 
 
 
 
 
  FRESHWATER UK PLC 
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BOARD OF DIRECTORS 
 
8 
 
Marie-Louise Windeler, Non-executive Chairman: Marie-Louise Windeler is an experienced senior 
executive and PR professional, with over 25 years’ experience in the PR industry. A former journalist with ITN 
and the Daily Express, Marie-Louise was CEO of one of the UK’s largest PR agencies, Hill and Knowlton UK, 
where she was responsible for its multi-million pound fee revenue and 275 staff. Marie-Louise is a Non-
executive Director of Prime Focus London Plc and VMA Search. She is also a member of the prestigious 
Marketing Group of Great Britain Club. 
 
Steve Howell, Chief Executive: Steve Howell founded the agency in 1997 and has led the development of 
the Group throughout. His previous experience included a period at the BBC where he was a producer and 
reporter in radio and television. He had previously worked for national and regional newspapers and as a 
public relations officer in local government. He has been responsible for developing Freshwater’s growth 
strategy and delivering a series of successful acquisitions. He was a Governor of the University of Wales 
Newport from 2005 to 2007 and is the PR representative in Wales of the European Ryder Cup Board. 
 
Edward Carter, Non-executive Director: Edward Carter, a chartered accountant, was appointed to the Board 
as an Executive Director in March 2006 becoming a Non-executive Director during 2009. He was for many 
years a partner at Ernst & Young, the global business advisers. He also played a key role in working on and 
with the boards of various companies as a consultant or non-executive director prior to being a joint founder of 
Quantum PR Plc, which was acquired by Freshwater in June 2005. He is an experienced PR consultant 
specialising in business-to-business, professional services and financial sectors. He is also a non-executive 
director of two privately owned businesses – Grove Industries Limited and Owl Optical Limited. 
 
Haydn Evans, Finance Director: Haydn Evans was appointed to the Board in December 2003. He has 15 
years experience in the telecommunications sector having worked for Mitel Networks Corporation and  Nortel 
Networks Corporation in the UK and Paris. Immediately prior to joining Freshwater he was a finance leader 
within Canadian-based Nortel, heading a 20-strong business team in the UK, Switzerland and Toronto and 
reporting directly to the vice president of finance. He has been responsible for the due diligence on and the 
financial integration of the eleven acquisitions undertaken by Freshwater since his appointment. 
 
John Underwood, Executive Director: John Underwood was appointed to the Board in June 2006. In the 
1980s, he was an award-winning TV reporter and presenter and worked for the BBC, ITV and Channel Four 
before becoming Director of Communications for the Labour Party. He founded Clear Communications in 1991 
and built it into one of the leading communication agencies in the healthcare sector. He is also a non executive 
director of Verita, the trading name of The Inquiry Consultancy Limited, a specialist management consultancy.  
 
 
 
   
FRESHWATER UK PLC 
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DIRECTORS' REPORT 
FOR THE YEAR ENDED 31 AUGUST 2009 
9 
 
The Directors present their report and the audited financial statements for the year ended 31
 
August 2009. 
 
Principal activities  
 
Freshwater Group (‘the Group’ or ‘Freshwater’) comprises Freshwater UK Plc (the ‘Company’) and its 
subsidiary undertakings. The Group’s principal activity is the provision of public relations and marketing 
services. The Company operates as a service company providing staff and administrative services to other 
Group members.  
 
Business Review  
 
A review of the Group’s business and the likely future developments therein is provided in the Chief 
Executive’s Review. Financial and other key performance indicators (‘KPI’) including revenue per full time 
employee have been used in the Chief Executive’s Review to facilitate the understanding of the development, 
performance and position of the Group’s business. The principal risks and uncertainties faced by the Group 
can be categorised as follows: 
 
Client loss 
 
Client losses hurt although some turnover over time is normal and to be expected. During the financial year 
Freshwater provided services to over 300 clients with only 3 accounting for more than 3% of revenue. A 
diverse and balanced client base mitigates the impact of any individual loss. 
 
Economic 
 
Our industry has not been immune to the recent economic downturn and at a macro level there is increased 
competition to satisfy reduced demand from a rapidly changing market place. We believe however that 
Freshwater is well placed to compete in these difficult times and is helped in this by its exposure to defensive 
sectors such as utilities, healthcare, transport and the public sector. 
 
Staff loss 
 
As a people based business our staff play a critical role in our client offering, and the loss of key staff could be 
a risk to our client relationships. To offset this risk, we have developed a team based approach to client 
service, so that no one member of staff is the sole point of contact with any given client. The Group 
additionally seeks to pursue employment practices that attract, retain and develop the talent it needs for its 
ongoing success.   
 
Results and dividends 
 
The Group’s results are on page 17. The Directors proposed the payment of a final ordinary dividend of 0.5p 
(2008:1.5p) per qualifying share. With the interim dividend of 0.75p per qualifying share (2008:1.5p) this 
produced a total ordinary dividend of 1.25p per qualifying share. The final ordinary dividend was paid on 5 
January 2010 to qualifying shareholders on the register on 27 November 2009. The financial statements do 
not reflect the final ordinary dividend which will be accounted for as an appropriation of retained earnings in 
the year ending 31 August 2010.  
 
Post balance sheet events  
 
In January 2010 the Group agreed a new overdraft facility and an amendment to the £1.2 million term loan it 
entered in February 2007. The Group’s borrowings have otherwise remained unchanged since 31 August 
2009. Further information on the new arrangements which have provided the Group with additional working 
capital is provided in notes 21 and 24 to the financial statements.    
FRESHWATER UK PLC 
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DIRECTORS' REPORT  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
10 
 
Directors  
 
The following individuals served as Directors of the Company during the year: 
 
  Appointed Resigned  Position at 31 August 2009  
Baroness Cohen of Pimlico  1 June 2007 12 February 2009  -  
S B Howell   25 August 2000 -  Chief Executive   
E G Carter  30 March 2006 -  Non-executive   
J H Evans  10 December 2002 -  Finance Director  
D B Haines  22 December 2003 12 February 2009  -  
D Howell  26 February 2004 8 June 2009  -  
J M Underwood  1 June 2006 -  Executive   
M-L Windeler  11 December 2007 -  Non-executive Chairman  
 
During the year M-L Windeler took on the role of Non-executive Chairman from Baroness Cohen and E G 
Carter moved from his role of Executive Director to that of Non-executive Director. The Company’s Directors 
have remained unchanged since the year end. K J Tilley a former Non-executive Director served as Company 
Secretary throughout the year. As permitted by the Companies Act 2006, Freshwater UK Plc has Directors’ 
and Officers’ Liability Insurance. 
 
Directors’ Interests 
 
The interests of those individuals who were Directors of the Company at the end of the financial year in the 
shares and debentures of the Company at the year end were: 
 
  No. of ordinary shares held at   % of ordinary share capital held  
  31 August 2008 31 August 2009  31 August 2008 31 August 2009 
S B Howell   1,217,280 1,263,780 7.88% 8.18% 
E G Carter  65,000 65,000 0.5% 0.42% 
J H Evans  15,770 62,270 0.1% 0.40% 
J M Underwood  342,400 342,400 2.22% 2.22% 
M-L Windeler  - - - - 
 
The above interests include the interests of the individuals’ immediate families. S B Howell’s and J H Evans’ 
interests include their interests in ordinary shares held by the Freshwater UK Pension Fund. S B Howell’s 
interest additionally includes his interest in ordinary shares held by Isca Mercatura Limited. J M Underwood’s 
interest includes his interest in ordinary shares held by the Underwood Pension Trust Mattioli Woods SIPP.  
 
Other than as above none of the Company’s Directors at the end of the financial year had an interest in the 
shares or debentures of Group members. The holdings of the Directors in the shares and debentures of Group 
members have remained unchanged since the year end. 
 
J H Evans is interested in options to subscribe for 29,000 ordinary shares in the Company as a result of 
entering share option contracts in previous financial years. None of the other Directors at the end of the 
financial year were interested in options over shares or debentures in Group members at the year end. All the 
options granted to J H Evans have been on similar terms to those advanced to other employees of the Group. 
Further information on the share option contracts entered into by the Group is provided in note 30 to the 
financial statements. J H Evans exercised no options during the financial year. This has remained the case 
since the year end.   
FRESHWATER UK PLC 
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DIRECTORS' REPORT  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
11
 
Substantial shareholdings 
 
In addition to the Directors detailed above the following individuals and entities were interested in 3% or more 
of the Company’s ordinary share capital at 31 August 2009: 
 
 
 No. of ordinary shares held at 
31 August 2009 
 % of ordinary share capital 
held at 31 August 2009 
Finance Wales Investments   1,849,284  11.98% 
IBIS Media VCT No 1   897,000  5.81% 
Herald Investment Trust   806,000  5.22% 
D Howell  725,000  4.69% 
M Howell  599,686  3.88% 
Victory VCT Plc   544,000  3.52% 
B O Morris  487,301  3.16% 
 
D Howell is related to S B Howell, a director of the Company. M Howell is not related to either D Howell or S B 
Howell. There have been no material changes in the substantial shareholdings in the Company since the year 
end.  
 
Creditor payment policy 
 
The Group agrees payment terms with its suppliers when it enters into binding purchase contracts. The Group 
seeks to abide by the payment terms agreed with suppliers whenever it is satisfied that the supplier has 
provided the goods or services in accordance with the agreed terms and conditions. The Group seeks to treat 
all of its suppliers fairly. At the end of the financial year creditor days were at 65 for the Company and the 
Group (2008: 60). 
 
Political and charitable donations 
 
During the year the Group made charitable donations of £1,000 (2008: £1,000). The Political Parties, Elections 
and Referendums Act 2000 (the ‘Act’) requires disclosure of any donations to an EU political organization 
(including a registered political party in the UK) or EU political expenditure in excess of £200. The terms 
‘donation’, ‘EU political organisation’ and ‘EU political expenditure’ are given broad definitions by the Act.  
Whilst the Group does not make donations to political parties or incur political expenditure within the normal 
meaning of those expressions, as part of its normal work on behalf of clients and as part of its own marketing, 
the Group can need to attend or sponsor events which are organised by political parties or other political 
organisations for which a charge is made. During the year the Group contributed an amount less than £2,000 
towards the catering costs of a commemorative event organised by the South African High Commission. 
 
Financial instruments 
 
A commentary on the financial instruments held by the Group and the Group’s exposure to credit, interest rate 
and liquidity risk is provided in note 18 to the financial statements. 
 
Corporate Governance 
 
The Company is not required to comply with the ‘Combined Code on Corporate Governance’ issued in June 
2008 by the Financial Reporting Council (‘the 2008 FRC Combined Code’) and does not report on how it has 
applied the principles therein or on the extent to which it has complied with the provisions therein throughout 
the year. The Company’s Directors are however committed to ensuring a high standard of corporate 
governance that reflects the 2008 FRC Combined Code in a manner proportionate to the Group’s size. An 
insight into the Company’s current corporate governance practice is provided below.  FRESHWATER UK PLC 
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DIRECTORS' REPORT  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
12
 
Corporate Governance (continued) 
 
Board of Directors 
 
The members of the Company’s Board of Directors (‘the Board’) are listed above. The Board includes both 
Executive and Non-executive Directors. The roles of Chairman and Chief Executive Officer are held by 
separate individuals. In the situation where Executive Directors take on Non-executive roles the Board 
considers that this does not necessarily affect their independence. In determining whether there are any such 
issues the Board takes into account the previous experience / background of the individual concerned. The 
Board meets regularly and its responsibilities include formulating, reviewing and approving strategy, budgets, 
acquisitions, capital expenditure and senior personnel appointments.   
 
Audit Committee 
 
The responsibilities of the Audit Committee include monitoring the integrity of the Company’s and the Group’s 
financial statements, reviewing the external auditor’s independence, objectivity and effectiveness and making 
recommendations to the Board in relation to the appointment, reappointment and removal of the external 
auditor. The following individuals served as members of the Audit Committee during the year.  
 
 Appointed Resigned  
E G Carter 8 June 2009 - 
Baroness Cohen of Pimlico 16 July 2007 1 October 2008 
D Howell 16 July 2007 8 June 2009 
M-L Windeler 1 October 2008 -  
 
Other individuals including other Directors of the Company and the Company’s auditors may attend meetings 
of the Audit Committee at its request.   
 
Remuneration Committee 
 
The responsibilities of the Remuneration Committee include reviewing the performance of the Company’s 
Executive Directors and setting the scale and structure of their remuneration and the basis of their service 
agreements and appointment with due regard to the interests of shareholders. The Remuneration Committee 
also determines the bonuses to be paid to Executive Directors. The following Non-executive Directors served 
as members of the Remuneration Committee during the year:  
 
 Appointed Resigned  
Baroness Cohen of Pimlico 16 July 2007 1 October 2008 
E G Carter  8 June 2009  - 
D B Haines 16 July 2007 12 February 2009  
D Howell 16 July 2007 8 June 2009 
M-L Windeler 8 June 2009 - 
 
Other individuals including other Directors of the Company and the Company’s auditors may attend meetings 
of the Remuneration Committee at its request.   
 
The remuneration of Non-executive Directors is determined by the Executive Directors who consider it 
essential, notwithstanding the size of the Company, to recruit and retain individuals of the highest calibre. The 
Executive Directors believe it is in the interests of shareholders that Non-executive Directors should be able to 
acquire shares and be provided with share options in addition to the fees they receive for their services.  
 
 
 
 
 
 
 
 
 
  FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
DIRECTORS' REPORT  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
13 
 
Attendance record  
 
The number of Board meetings and committee meetings attended during the year by Board and committee 
members was: 
 
 
Board 
meetings 
Audit 
Committee 
Remuneration 
Committee 
 
Baroness Cohen of Pimlico 2 (2) - (-) - (-)  
S B Howell  5 (5) n/a n/a  
E G Carter 5 (5) 1 (1) - (-)  
J H Evans 5 (5) n/a n/a  
D B Haines 3 (3) n/a 1 (1)  
D Howell 4 (4) 2 (2) 1 (1)  
J M Underwood 4 (5) n/a n/a  
M-L Windeler 5 (5) 3 (3) - (-)  
 
Figures in brackets indicate the number of meetings during the year for which the individual was a Board or 
committee member.  
 
Going concern 
 
The Directors, at the time of the approving the financial statements, have determined that there is a 
reasonable expectation that the Company and the Group have adequate resources to continue in operational 
existence for the foreseeable future.  
 
In reaching this conclusion the Directors noted that the Company and the Group had net current liabilities on 
31 August 2009 and considered the Company’s and the Group’s recent and forecast financial performance. 
The current economic environment is difficult, however, after taking into account a range of variances in the 
Company’s and Group’s forecast financial performance and the arrangements in place with the Company’s 
and the Group’s bankers described in notes 21 and 24 to the financial statements, the Directors consider that 
the Company and the Group has, and should continue to have, adequate working capital to meet its 
requirements for the foreseeable future. For this reason the Directors have adopted the going concern basis in 
preparing the financial statements. 
 
Auditors and disclosure of information to auditors  
 
As far as the Directors are aware there is no relevant audit information of which the Company’s auditors are 
unaware and they have taken all the steps that they ought to have taken as Directors in order to make 
themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of 
that information. 
 
The auditors, PKF (UK) LLP, have indicated their willingness to continue in office, and a resolution that they be 
re-appointed will be proposed at the Annual General Meeting. 
 
This report was approved by the Board on 2 February 2010 and signed on its behalf by: 
 
 
 
 
J H Evans  
Finance Director  
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
14
STATEMENT OF DIRECTORS' RESPONSIBILITIES 
FOR THE YEAR ENDED 31 AUGUST 2009 
 
The directors are responsible for preparing the directors' report and the financial statements in accordance 
with applicable law and regulations.  
 
Company law requires the directors to prepare financial statements for each financial year. Under that law the 
directors have, as required by the AIM Rules of the London Stock Exchange, elected to prepare the group 
financial statements in accordance with International Financial Reporting Standards as adopted by the 
European Union and have also elected to prepare the parent company financial statements in accordance with 
those standards. Under company law the directors must not approve the financial statements unless they are 
satisfied that they give a true and fair view of the state of affairs of the company and the group and of the profit 
or loss of the group for that period. In preparing these financial statements the directors are required to: 
 
• select suitable accounting policies and then apply them consistently; 
• make judgments and estimates that are reasonable and prudent; 
• state whether the financial statements have been prepared in accordance with IFRSs as adopted by the 
European Union; and 
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the 
company and the group will continue in business. 
 
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain 
the company's transactions and disclose with reasonable accuracy at any time the financial position of the 
company and the group and enable them to ensure that the financial statements comply with the Companies 
Act 2006. They are also responsible for safeguarding the assets of the company and the group and hence for 
taking reasonable steps for the prevention and detection of fraud and other irregularities. 
 
The directors are responsible for the maintenance and integrity of the corporate and financial information 
included on the company's website. Legislation in the United Kingdom governing the preparation and 
dissemination of the financial statements and other information included in annual reports may differ from 
legislation in other jurisdictions. 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FRESHWATER UK PLC 
15 
 
We have audited the financial statements of Freshwater UK Plc for the year ended 31 August 2009 which 
comprise the consolidated income statement, the consolidated and company balance sheets, the consolidated 
and company statements of changes in equity, the consolidated and company cash flow statements and the 
related notes. The financial reporting framework that has been applied in their preparation is applicable law 
and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards 
the parent company financial statements, as applied in accordance with the provisions of the Companies Act 
2006.   
 
This report is made solely to the company's members, as a body, in accordance with sections 495 and 496 of 
the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's 
members those matters we are required to state to them in an auditors' report and for no other purpose. To the 
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company 
and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. 
 
Respective responsibilities of directors and auditors 
 
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the 
preparation of the financial statements and for being satisfied that they give a true and fair view. Our 
responsibility is to audit the financial statements in accordance with applicable law and International Standards 
on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical 
Standards for Auditors. 
 
Scope of the audit 
 
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient 
to give reasonable assurance that the financial statements are free from material misstatement, whether 
caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to 
the group’s and the parent company’s circumstances and have been consistently applied and adequately 
disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall 
presentation of the financial statements. 
 
Opinion on financial statements 
 
In our opinion; 
 
• the financial statements give a true and fair view of the state of the group’s and the parent company’s 
affairs as at 31 August 2009 and of the group’s profit for the year then ended; 
 
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the 
European Union; 
 
• the parent company financial statements have been properly prepared in accordance with IFRSs as 
adopted by the European Union as applied in accordance with the provisions of the Companies Act 2006; 
and 
 
• the financial statements have been prepared in accordance with the requirements of the Companies Act 
2006. 
 
Opinion on other matter prescribed by the Companies Act 2006 
 
In our opinion the information given in the directors’ report for the financial year for which the financial 
statements are prepared is consistent with the financial statements.  
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FRESHWATER UK PLC 
16 
 
Matters on which we are required to report by exception 
 
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to 
report to you if, in our opinion: 
 
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit 
have not been received from branches not visited by us; or 
 
• the parent company financial statements are not in agreement with the accounting records and returns; or 
 
• certain disclosures of directors’ remuneration specified by law are not made; or 
 
• we have not received all the information and explanations we require for our audit. 
 
 
 
 
 
PKF (UK) LLP 
Timothy Smith (Senior statutory auditor) 
for and on behalf of PKF (UK) LLP, Statutory auditors 
 
 
Cardiff 
2 February 2010 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
17
 
CONSOLIDATED INCOME STATEMENT 
FOR THE YEAR ENDED 31 AUGUST 2009 
 
 
  2009  2008 
 
Note £ 
 
£ 
  
TURNOVER  9,068,203 
 
9,523,211 
   
 
 
 
REVENUE  6,698,141 
 
7,513,794 
 
Other income  7 - 
 
126,548 
 
Exceptional administrative expenses 8 - 
 
(155,807) 
  
Other administrative expenses  6 (6,370,224) 
 
(6,271,689) 
OPERATING PROFIT  327,917 
 
1,212,846 
 
Finance income 10 8,106 
 
96,433 
 
Finance costs 10 (96,011) 
 
(140,339) 
PROFIT BEFORE INCOME TAX 6 240,012 
 
1,168,940 
  
Income tax expense 11 (34,413) 
 
(422,278) 
PROFIT FOR THE YEAR   205,599 
 
746,662 
   
 
 
 
Basic earnings per share 31 1.53p 
 
6.26p 
Diluted earnings per share 31 1.46p  5.79p 
 
The notes on pages 23 to 51 are an integral part of these financial statements. 
 
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present 
the parent company income statement. The Company's profit for the financial year was £470,576 (2008 
£525,410). 
 
 
 
 
 
   
FRESHWATER UK PLC 
COMPANY NUMBER: 4059741 (ENGLAND AND WALES) 
18 
 
CONSOLIDATED BALANCE SHEET 
AT 31 AUGUST 2009 
 
 
  2009 
 2008 
Restated* 
 
Note £ 
 
£ 
ASSETS     
Non-current assets     
Property, plant and equipment 13 944,287  872,742 
Intangible assets 14 10,412,277  8,940,984 
  11,356,564  9,813,726 
Current assets     
Trade and other receivables 19 2,295,979  2,351,679 
Deferred consideration 20 -  215,894 
Cash and cash equivalents 21 -  1,077,633 
  2,295,979  3,645,206 
Total assets  13,652,543  13,458,932 
EQUITY     
Issued equity capital 27 1,544,246  1,256,901 
Share premium  7,123,837  6,305,883 
Other reserves  20,000  635,000 
Retained earnings  1,259,505  1,353,837 
  9,947,588  9,551,621 
LIABILITIES     
Non-current liabilities     
Deferred consideration 20 350,000  - 
Long term borrowings 24 431,973  689,360 
Deferred tax liabilities 26 64,517  42,719 
  846,490  732,079 
Current liabilities     
Bank overdraft 21 3,421  - 
Trade and other payables 22 1,554,624  1,483,230 
Deferred consideration 20 350,000  680,333 
Derivative financial instruments 23 87,000  30,049 
Short-term borrowings 24 420,324  350,365 
Current tax liabilities  443,096  631,255 
  2,858,465  3,175,232 
Total liabilities  3,704,955  3,907,311 
Total equity and liabilities  13,652,543  13,458,932 
 
* See note 5  
 
The notes on pages 23 to 51 are an integral part of these financial statements. The financial statements were 
approved and authorised for issue by the Board and were signed on its behalf on 2 February 2010 by: 
 
 
 
 
 
 S B Howell     J H Evans  
 Chief Executive    Finance Director 
 
 
  FRESHWATER UK PLC 
 COMPANY NUMBER: 4059741 (ENGLAND AND WALES) 
19 
 
COMPANY BALANCE SHEET 
AT 31 AUGUST 2009 
 
 
  2009 
 2008 
Restated* 
 
Note £ 
 
£ 
ASSETS     
Non-current assets     
Property, plant and equipment 13 605,855  472,965 
Intangible assets 14 4,679,151  2,605,895 
Investments in subsidiary undertakings 15 7,345,832  8,019,378 
  12,630,838  11,098,238 
Current assets     
Trade and other receivables 19 961,103  1,198,564 
Deferred consideration 20 -  215,894 
Cash and cash equivalents 21 -  499,377 
  961,103  1,913,835 
Total assets  13,591,941   13,012,073 
EQUITY     
Issued equity capital 27 1,544,246  1,256,901 
Share premium  7,123,837  6,305,883 
Other reserves  20,000  635,000 
Retained earnings  488,578  317,933 
  9,176,661  8,515,717 
LIABILITIES     
Non-current liabilities     
Deferred consideration 20 350,000  - 
Long term borrowings 24 431,973  674,839 
Deferred tax liabilities 26 48,537  30,925 
  830,510  705,764 
Current liabilities     
Bank overdraft 21 1,644,909  892,964 
Trade and other payables 22 1,092,657  1,801,339 
Deferred consideration 20 350,000  680,333 
Derivative financial instruments 23 87,000  30,049 
Short-term borrowings 24 410,204  335,844 
Current tax  -  50,063 
  3,584,770  3,790,592 
Total liabilities  4,415,280  4,496,356 
Total equity and liabilities  13,591,941  13,012,073 
 
* See note 5 
 
The notes on pages 23 to 51 are an integral part of these financial statements. The financial statements were 
approved and authorised for issue by the Board and were signed on its behalf on 2 February 2010 by: 
 
 
 
 
 
 S B Howell     J H Evans  
 Chief Executive    Finance Director 
  FRESHWATER UK PLC 
20 
 
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY  
FOR THE YEAR ENDED 31 AUGUST 2009 
 
 
 Note 
 Ordinary 
shares 
 Share 
premium 
 Share 
option  
 Other 
reserves 
 Retained 
earnings 
 
   £  £  £  £  £ 
31 August 2007   1,115,300 5,266,624 20,000 700,000 970,391
Profit for the year   - - - - 746,662
Dividends 29 - - - - (363,216)
Total recognised income and expense  - - - - 383,446
Issue of ordinary shares  141,601 1,039,259 - - -
Movement in contingent consideration 17 - - - (85,000) -
31 August 2008  1,256,901 6,305,883 20,000 615,000 1,353,837
Profit for the year   - - - - 205,599
Dividends 29 -- - -(299,931)
Total recognised income and expense  - - - - (94,332)
Issue of ordinary shares  27 287,345 817,954 - - -
Movement in contingent consideration 17 - - - (615,000) -
31 August 2009  1,544,246 7,123,837 20,000 - 1,259,505
 
COMPANY STATEMENT OF CHANGES IN EQUITY  
FOR THE YEAR ENDED 31 AUGUST 2009 
 
 
 Note 
 Ordinary 
shares  
 Share 
premium 
 Share 
option  
 Other 
reserves 
 Retained 
earnings 
 
   £  £  £  £  £ 
31 August 2007   1,115,300 5,266,624 20,000 700,000 155,739
Profit for the year  - - - - 525,410
Dividends 29 -- - -(363,216)
Total recognised income and expense  - - - - 162,194
Issue of ordinary shares  141,601 1,039,259 - - -
Movement in contingent consideration 17 - - - (85,000) -
31 August 2008  1,256,901 6,305,883 20,000 615,000 317,933
Profit for the year   - - - - 470,576
Dividends 29 -- - -(299,931)
Total recognised income and expense  - - - - 170,645
Issue of ordinary shares  27 287,345 817,954 - - -
Movement in contingent consideration 17 - - - (615,000) -
31 August 2009  1,544,246 7,123,837 20,000 - 488,578 FRESHWATER UK PLC 
21
 
CONSOLIDATED CASH FLOW STATEMENT 
FOR THE YEAR ENDED 31 AUGUST 2009 
 
 
  2009 
 2008 
Restated* 
 
 £ 
 
£ 
Operating profit  327,917 1,212,846
Depreciation of property, plant and equipment 13 219,338 150,040
Amortisation of other intangible assets  14 4,984 1,821
Unrealised loss on derivative financial instrument 23 56,951 30,749
Profit on disposal of fixed assets  (3,714) (108,402)
Change in trade and other receivables  60,774
 
321,674
Change in trade and other payables  26,157 (462,484)
  692,407 1,146,244
Interest received  8,106 96,433
Interest paid  (96,011) (140,399)
Income taxes paid   (190,943) (107,132)
Net cash flow from operating activities   413,559 995,146
   
 
 
Net cash flow arising from acquisitions  (1,181,385) 
 
(2,746,303) 
Purchase of property, plant and equipment  (275,287) 
 
(497,075) 
Disposal of property, plant and equipment   13,159 
 
749,195 
Net cash flow from investing activities  (1,443,513) 
 
(2,494,183) 
   
 
 
Proceeds from the issue of share capital  440,218 
 
- 
Proceeds from finance leases  171,000 
 
- 
Repayment of borrowings   (362,387) 
 
 (630,573) 
Dividends paid 29 (299,931) 
 
(363,216) 
Net cash flow from financing activities  (51,100) 
 
(993,789) 
   
 
 
Decrease in cash and cash equivalents  (1,081,054) 
 
(2,492,826) 
Cash and cash equivalents at the start of the period 21 1,077,633 
 
3,570,459 
Cash and cash equivalents at the end of the period  21 (3,421) 
 
1,077,633 
 
* See note 5 FRESHWATER UK PLC 
22
 
COMPANY CASH FLOW STATEMENT 
FOR THE YEAR ENDED 31 AUGUST 2009 
 
 
  2009 
  
2008 
 
 £ 
 
£ 
Operating loss  (90,199) (107,420)
Depreciation of property, plant and equipment 13 104,139 64,625
Amortisation of other intangible assets  14 917 1,000
Revaluation of investments  - (46,712)
Unrealised loss on derivative financial instrument 23 56,951 30,749
Profit on disposal of fixed assets  - (108,402)
Change in trade and other receivables  (13,415) 104,524
Change in trade and other payables  131,887 14,215
  190,280 (47,421)
Interest received  8,106 95,161
Interest paid  (84,215) (129,543)
Income taxes paid   (50,314) -
Net cash flow from operating activities   63,857 (81,803)
   
 
 
Net cash flow arising from acquisitions  (1,181,385) 
 
(3,064,336) 
Purchase of property, plant and equipment  (236,550) 
 
(321,385) 
Disposal of property, plant and equipment   25,545 
 
740,870 
Dividends received from subsidiary undertakings 33 729,680 
 
650,000 
Net cash flow from investing activities  (662,710) 
 
(1,994,851) 
   
 
 
Proceeds from the issue of share capital  440,218 
 
- 
Proceeds from finance leases   171,000 
 
- 
Repayment of borrowings  (339,515) 
 
(630,573) 
Change in intra group funding 33 (624,241) 
 
288,922  
Dividends paid 29 (299,931) 
 
(363,216) 
Net cash flow from financing activities  (652,469) 
 
(704,867) 
   
 
 
Decrease in cash and cash equivalents  (1,251,322) 
 
(2,781,521) 
Cash and cash equivalents at the start of the period 21 (393,587) 
 
2,387,934 
Cash and cash equivalent at the end of the period  21 (1,644,909) 
 
(393,587) 
  FRESHWATER UK PLC 
 
NOTES TO THE FINANCIAL STATEMENTS 
FOR THE YEAR ENDED 31 AUGUST 2009 
23 
 
1. FRESHWATER GROUP  
 
Freshwater Group (‘the Group’) comprises Freshwater UK Plc (the ‘Company’) and its subsidiary 
undertakings. The Company is a limited liability company incorporated and domiciled in the United 
Kingdom. Its ordinary shares are traded on the Alternative Investment Market. The Company’s 
registered number is 4059741 (England and Wales) and its registered office is Raglan House, Cardiff 
Gate Business Park, Cardiff, CF23 8RB. 
 
2. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE   
 
The group and parent company financial statements of the Company for the year ended 31 August 
2009 (‘the financial statements’) were authorised for issue by the Company’s Board on 2 February 2010 
and signed on the board’s behalf by S B Howell and J H Evans. The financial statements have been 
prepared in accordance with International Financial Reporting Standards (‘IFRS’) adopted by the 
European Union (‘EU’) and in accordance with applicable provisions of the Companies Act 2006. 
 
3. BASIS OF PREPARATION   
 
 The financial statements have been prepared in accordance with IFRSs and International Financial 
Reporting Interpretations Committee (‘IFRIC’) interpretations issued and effective for the year ended 31 
August 2009.  
  
 The Directors, at the time of the approving the financial statements, have determined that there is a 
 reasonable expectation that the Company and the Group have adequate resources to continue in 
 operational existence for the foreseeable future. In reaching this conclusion the Directors noted that the 
 Company and the Group had net current liabilities on 31 August 2009 and considered the Company’s 
 and the Group’s recent and forecast financial performance. The current economic environment is 
 difficult, however, after taking into account a range of variances in the Company’s and Group’s forecast 
 financial performance and the arrangements in place with the Company’s and the Group’s bankers 
 described in notes 21 and 24 to the financial statements, the Directors consider that  the Company and 
 the Group has, and should continue to have, adequate working capital to meet its requirements for 
 the foreseeable future. For this reason Directors have adopted the going concern basis in preparing 
 the financial statements. 
 
4. SIGNIFICANT ACCOUNTING POLICIES 
  
The principal accounting policies applied in the preparation of the financial statements are set out 
below. These policies were consistently applied. The functional currency and presentational currency of 
the Group is Sterling. 
 
a)  Basis of consolidation 
 
 The group financial statements consolidate the financial statements of the Company and the entities 
that it controls (its subsidiaries) drawn up to 31 August each year. Control comprises the power to 
govern the financial and operating policies of an entity so as to obtain benefit from its activities. The 
financial statements of subsidiaries are incorporated from the date of their acquisition, being the date on 
which control passed to the Group, and continue to be included until the date that such control ceases. 
The effects of intra-group transactions and intra-group balances are eliminated in full. 
 
b) Revenue and turnover 
 
 Revenue comprises professional fees and mark-ups. Professional fees and mark-ups are recognised in 
proportion to the extent to which the service to be provided under the related contract has been 
performed. Revenue is stated exclusive of value added tax. Turnover (billings) is revenue stated gross 
of marginal costs such as print costs and the purchase of advertising space that are incurred in 
providing a service and that in accordance with industry practice are marked up and passed on to 
clients. Amounts billed to clients in advance are carried in the balance sheet as deferred income until 
the related service has been provided or the related cost incurred. Work carried out and costs incurred 
that are to be marked up and passed on to clients that have yet to be invoiced are included in accrued 
income.    
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
24
 
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 
 
c)  Segmental analysis  
 
 A geographical segment is a distinguishable component of an enterprise that provides products and 
services within a particular economic environment and that is subject to risks and returns that are 
different from those of components operating in other economic environments. A business segment is a 
distinguishable component of an enterprise that provides products or services and that is subject to 
risks and returns that are different from those of other business segments. The Group’s significant 
operations are entirely within the UK and the Group is not considered to consist of differing geographical 
segments. All the Group’s significant operations are in the business of providing public relations and 
marketing services and the Group is not considered to comprise of differing business segments. In the 
absence of differing business and geographical segments segmental information is not provided. 
 
d) Dividends 
 
 Dividends are recognised in the period in which they are considered to have become no longer at the 
discretion of the Company. Interim dividends are recognised in the period in which they are paid. Final 
dividends are recognised in the period in which they are appropriately authorised.  
 
e) Property, plant and equipment 
 
Property, plant and equipment is stated at cost less accumulated depreciation and accumulated 
impairment losses. The residual values of property, plant and equipment are reassessed annually and 
when there is an indication of a change in residual value. Freehold land is not depreciated. Property, 
plant and equipment is depreciated so as to write off cost less estimated residual value over its 
expected life on the following bases: 
 
• Freehold buildings – 3% straight line 
• Leasehold land and buildings– 33% straight line 
• Plant and Machinery – 25% reducing balance  
• Motor Vehicles – 25% on cost 
• Fittings and equipment – 10% - 25% reducing balance  
 
f)  Business combinations within the scope of IFRS 3 – Business Combinations 
 
Business combinations within the scope of IFRS 3 are accounted for under the purchase method. 
 
Goodwill represents the future economic benefits arising from assets acquired in a business 
combination that are not individually identified and separately recognised. It comprises the excess of the 
cost of a business combination over the net value of the identifiable assets acquired and the liabilities 
assumed. The cost of a business combination is measured as the aggregate of the consideration 
transferred, the amount of any non-controlling interest in the acquiree and, in the case of a business 
combination achieved in stages, the acquisition date fair value of any previously held equity interest in 
the acquiree. Goodwill is stated at cost less accumulated impairment losses. Where the cost of a 
business combination is less than the net value of the identifiable assets acquired and liabilities 
assumed the associated gain is recognised in the income statement in the period of acquisition.  
 
The terms of a business combination may require for purchase consideration to be provided subsequent 
to the acquisition date. The value of such deferred consideration may additionally be dependent upon 
future events. In such circumstances an estimate of the ultimate value of the deferred contingent 
consideration is recognised at the date of acquisition. Subsequent revisions are accounted for as a 
revision to the cost of the business combination and lead to a revision to the cost of goodwill associated 
with the combination. Such revisions are recognised prospectively in the accounting period that they are 
made. Deferred consideration is not discounted where the effect of such discounting is considered 
immaterial and is recognised as a liability or as a component of equity depending on its nature. 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
25 
 
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 
 
f)  Business combinations within the scope of IFRS 3 – Business Combinations (continued) 
 
Goodwill acquired in a business combination is allocated from the date of acquisition to the cash 
generating units that are expected to benefit from the synergies of the combination. In the event of the 
subsequent reorganisation of the cash generating units to which it has been allocated goodwill is 
correspondingly reallocated. Cash generating units to which goodwill has been allocated are tested for 
impairment annually and whenever there is an indication that the unit may be impaired. An impairment 
review consists of comparing the carrying value of the cash generating unit including goodwill to its 
recoverable amount. The recoverable amount of a cash generating unit is the higher of its fair value less 
costs to sell and its value in use being an estimate of the present value of the future cash flows it is 
expected to generate. If the carrying amount exceeds the recoverable amount an impairment loss is 
recognised firstly by reducing the carrying amount of goodwill and then by reducing the carrying value of 
the other assets of the cash generating unit on a pro rata basis. Impairment losses are recognised in the 
income statement. Impairments of goodwill are not subsequently reversed.  
 
g)  Business combinations outside the scope of IFRS 3 – Business Combinations  
 
Certain business combinations fall outside the scope of IFRS 3 including combinations that involve 
entities or businesses under common control (e.g. group restructurings). IFRS does not provide specific 
guidance on how to account for such combinations. In the absence of such guidance the Group refers to 
IFRS 3 and other elements of generally accepted accounting practice and explicitly discloses the 
accounting treatment it has followed.  
 
h)  Other intangible assets  
 
Other intangible assets are stated at cost less accumulated amortisation and accumulated impairment 
losses. They are amortised to residual values on a straight line basis over their estimated useful lives 
and are reviewed for impairment whenever changes in circumstances indicate their carrying value may 
not be recoverable. Amortisation is included in administrative expenses in the income statement.  
 
i)  Trade receivables 
 
Trade receivables are stated at the original invoice amount less allowances made for doubtful 
receivables. Provision is made where there is objective evidence that the group will be unable to recover 
balances in full. Trade receivables are not discounted as the effect would not be material.  
  
j)  Derivative financial instruments  
  
The Group has sought to manage its interest rate risk through entering an interest (base) rate swap. 
The contract is carried at fair value with any gains or losses being taken to the income statement.   
 
k)  Cash and cash equivalents 
 
Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid 
investments that are readily convertible to known amounts of cash and which are subject to an 
insignificant risk of change in value. The group overdraft facility is an integral part of the Group’s cash 
management strategy and is considered to form part of cash and cash equivalents for the purposes of 
the statement of cash flows. 
 
l)  Trade payables 
 
 Trade payables are stated at cost. They are not discounted as the effect would not be material. 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
26 
 
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 
 
m)  Borrowings 
 
Borrowings are initially recognised at fair value and are subsequently measured at amortised cost 
calculated in accordance with the effective interest method.  
 
n)  Leases  
 
Where the use of an asset is funded by leasing arrangements that give rights over the asset 
approximating to ownership the asset is accounted for as if it has been purchased and recognised at the 
lower of fair value and the present value of the minimum lease payments. The capital element of the 
obligations under the associated leasing arrangements is shown as obligations under finance leases 
and lease payments are apportioned between interest which is charged to the income statement and 
liability which reduces the outstanding obligation so as to give a constant rate of charge on the 
outstanding lease obligations. All other leases are considered operating leases and payments 
thereunder are recognised as an expense in the income statement on a straight line basis over the 
lease term.   
 
o)  Deferred taxation 
 
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying 
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the 
computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences. 
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available 
against which deductible temporary differences can be utilised. Exceptionally such assets and liabilities 
are not recognised if the temporary difference arises from the recognition of goodwill or the initial 
recognition (other than a business combination) of other assets and liabilities in a transaction that 
affects neither taxable profit or accounting profit. The carrying amount of deferred income tax assets is 
reviewed at each balance sheet date and reduced to the extent that it is no longer probable that 
sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. 
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year 
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been 
enacted or substantively enacted at the balance sheet date. 
    
p)  Share based payments  
 
The cost of equity settled share option contracts is measured as the fair value of the associated options 
at the date of their grant. Fair value is calculated using the recognised Black–Scholes–Merton 
methodology. This cost is expensed on a straight line basis over the associated vesting period in a 
manner that reflects the expectation of the number of options that will eventually vest.  More particularly 
at each balance sheet date before vesting the cumulative charge that should have been expensed in 
view of the extent to which the vesting period has expired and management’s then best estimate of the 
number of equity instruments that will ultimately vest is calculated. The movement in the cumulative 
expense since the previous balance sheet date is then recognised as an expense in the income 
statement with a corresponding entry in equity.  
 
q)  Accounting estimates and judgements 
 
In applying the accounting polices detailed above decisions sometimes have to be made as to the likely 
 outcome of future events. Those judgements and estimates made in preparing the financial statements 
 are based on historical experience and assumptions that the Directors believed were reasonable in the 
circumstances. 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
27
 
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 
 
q)  Accounting estimates and judgements (continued) 
 
The Directors consider the key judgements and estimates made in preparing the financial statements to 
have been those relating to: 
 
• the recognition of revenue in relation to contracts which straddle the year end; 
• the valuation of deferred contingent consideration; and; 
• the valuation of goodwill and other intangible assets 
  
 These judgements and estimates are discussed in more detail both above and in the relevant notes to 
 the financial statements.  
 
r)  Impact of standards not yet effective  
 
The Directors have considered standards and interpretations which have been issued but are not yet 
effective and have not been early adopted by the Group. 
 
IFRS 8 - Operating Segments. This is effective for accounting periods beginning on or after 1 January 
2009 and replaces IAS 14 Segment Reporting. It has been adopted by the EU. Adoption of the standard 
will have no effect on the Group’s reported profit or equity. The Directors have not yet completed their 
evaluation of the impact of adoption on the disclosures in the group financial statements. 
 
IAS 1 – Presentation of Financial Statements Revised. This is effective for accounting periods beginning 
on or after 1 January 2009. It has yet to be adopted by the EU. Adoption of the standard would have no 
effect on the Group’s reported profit or equity. The Directors have not yet completed their evaluation of 
the potential impact of adoption on the disclosures in the group financial statements. 
  
 IAS 23 – Borrowing Costs Revised. This is effective for accounting periods beginning on or after 1 
January 2009. It has yet to be adopted by the EU. The revised standard eliminates the current option of 
expensing borrowing costs if they relate to the acquisition, construction or production of a qualifying 
asset. The Directors have not yet completed their evaluation of the potential impact of adoption.  
  
 IFRS 3 – Business Combinations Revised. This is applicable to business combinations occurring in 
accounting periods beginning or after 1 July 2009. It has yet to be adopted by the EU. The revised 
standard differs in a number of respects and inter alia requires all transaction costs as well as revisions 
to the valuation of deferred contingent consideration as a result of post acquisition events to be 
expensed through the income statement. Adoption of the revised standard would not require the 
restatement of the accounting for business combinations that were effected in the current or prior 
periods.   
 
 It is not expected that the adoption of those other standards or interpretations so far issued by the 
International Accounting Standards Board that are effective for accounting periods beginning on or after 
1 September 2009 will have a material impact on the financial statements.  
 
5. RESTATEMENT OF PRIOR YEAR COMPARATIVES  
 
 In prior year financial statements amounts accrued for work done and costs incurred that are to be 
marked up and passed on to clients were reported as inventories on the face of the Group and 
Company balance sheets and disclosed in the notes to the financial statements as work in progress and 
stocks. The Company consider that such amounts are more appropriately reported as trade and other 
receivables and disclosed in the notes to the financial statements as accrued income. In addition the 
Group and Company have disclosed separately on the face of the balance sheet deferred consideration 
receivable and payable whereas in the prior year they were disclosed in trade and other receivables and 
trade and other payables respectively. Prior year information has been restated accordingly. 
Restatement has had a presentational impact only and has not resulted in the restatement of the 
Group’s prior year profits or equity.  
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
28 
 
6. PROFIT BEFORE TAX 
 
Profit before tax is stated after charging the following: 
    2009  2008 
   
 £ 
 
 £ 
 
  Depreciation of property, plant and equipment  219,338  150,040 
  Amortisation of other intangible assets  4,984  1,821 
  Amounts payable under operating leases  478,803  356,754 
  Unrealised loss on derivative contract    56,951  30,749 
  Employee costs   4,135,849  4,264,564 
 
 Within depreciation of property, plant and equipment is £10,000 (2008: £10,000) relating to assets held 
 under finance leases. Amounts payable under operating leases primarily relate to leases entered into in 
 order to occupy office premises.  
 
7. OTHER INCOME   
  
    2009  2008 
   
 £ 
 
 £ 
 
  Gain on disposal of Freshwater House (note 13)   - 126,548
 
8. EXCEPTIONAL ADMINISTRATIVE EXPENSES   
 
    2009  2008 
   
 £ 
 
 £ 
 
  Write off of trade debtor balance (note 19)   - 155,807
 
9. EMPLOYEE COSTS 
 
    2009  2008 
   
 £ 
 
 £ 
 
  Wages and salaries  3,644,440 3,802,255
  Social security costs  387,158 353,617
  Other pension costs  104,251 108,692
    4,135,849 4,264,564
 
 The Company is the sole employer within the Group. Bonuses dependent upon the achievement of 
certain financial and non-financial targets are payable to qualifying employees following the end of a 
financial year. Included in wages and salaries are bonuses of £nil (2008: £20,768). The Group’s holiday 
year runs from 1 January to 31 December and employees are entitled to accumulate holiday not taken 
within a leave cycle subject to a maximum of 5 days. This must be taken within 12 months of the end of 
the associated leave cycle. Unused accrued holiday benefits vest upon the termination of employment 
and provision is made to reflect this. The Group offers qualifying employees the opportunity to enter into 
a group personal pension contract that provides money purchase benefits. More generally at the 
request of a qualifying employee the Group will contribute an amount equal to 3% of their basic salary to 
a personal pension arrangement of their choice.   
 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
29 
 
9. EMPLOYEE COSTS (CONTINUED) 
 
The average number of employees during the year including Executive Directors was as follows: 
 
    2009  2008 
  Directors    4 5
  Administrative  11 18
  Public Relations and Marketing Services   89 93
    104 116
 
10. FINANCIAL INCOME AND EXPENSES 
 
    2009  2008 
   
 £ 
 
 £ 
 
  Interest receivable on deposits  8,106 96,433
    
  Interest payable and charges on borrowings and overdrafts  81,011 136,079
  Finance lease and hire purchase contracts costs   15,000 4,260
    96,011 140,339
 
11. TAXATION 
 
    2009  2008 
   
 £ 
 
 £ 
 
  Current taxation  
  UK corporation tax on profits for the year  85,610 352,953
  Adjustments relating to UK corporation tax on prior year profits  (72,995) 64,676
    
  Deferred taxation  
  Origination and reversal of temporary differences  21,798 4,649
    
  Income tax expense  34,413 422,278
    
  Profit before tax  240,012 1,168,940
    
  Effective tax rate   14.33% 36.12%
    
  
Profit before tax at the std rate of UK corporation tax of 28% 
(2008: 29.16%) 
 
67,203 340,863
    
  Adjustments relating to UK corporation tax on prior year profits   (72,995) 64,676
  Non deductible expenses  15,948 13,708
  Capital allowances below depreciation  9,675 849
  Marginal relief  (1,594) (2,467)
  Other timing differences  (5,622) -
  Movement on deferred tax balances   21,798 4,649
  Income tax expense  34,413 422,278
 
Effective tax rates of 14.33% and 36.12% for the year ended 31 August 2009 and the year ended 31 
August 2008 reflect the resolution of a number of one-off issues relating to the taxation of the pre-
acquisition profits of recent acquisitions and the move to reporting under IFRS in 2007.   
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
30 
 
12. AUDITORS’ REMUNERATION 
 
    2009  2008 
   
 £ 
 
 £ 
 
  Fees payable by the Company to the Company’s auditors for the audit of  
  the Company’s annual accounts  9,500 8,750
  Fees payable by the Group to the Company’s auditors for other services:  
  Audit of the Company’s subsidiaries  63,660 61,600
  Tax Services  20,100 19,500
  Other services  3,850 -
    97,110 89,850
  
The Directors considered the auditors to be best placed to provide the non-audit services above. The 
Audit Committee reviews the nature of non-audit services to ensure independence is maintained.  
 
13. PROPERTY, PLANT AND EQUIPMENT 
  
 a) Group  
 
  
 
Land and 
buildings 
 Leasehold 
land and 
buildings 
 
Plant and 
machinery 
 
Motor 
Vehicles  
 
Fittings and 
equipment 
 
Total  
  
 
£  £  £  £  £  £ 
  Cost  
  31 August 2007 648,718 60,359 309,648 18,970 648,098 1,685,793
  Acquisitions - 82,161 - 86,744 584,861 753,766
  Additions - 15,556 543 - 480,976 497,075
  Disposals (648,718) - -(17,317) (40,260) (706,295)
  31 August 2008 - 158,076 310,191 88,397 1,673,675 2,230,339
  Acquisitions - - - -58,78058,780
  Additions - - - - 275,287 275,287
  Disposals - (504) - (31,725) - (32,229)
  31 August 2009 - 157,572 310,191 56,672 2,007,742 2,532,177
   
   
  Depreciation        
  31 August 2007 34,396 15,036 279,643 12,898 332,645 674,618
  Acquisitions -43,916 -44,228 511,522 599,666
  Disposals (44,072) - -(12,019) (10,636) (66,727)
  Charge for the year 9,676 31,893 6,699 6,351 95,421 150,040
  31 August 2008  - 90,845 286,342 51,458 928,952 1,357,597
  Acquisitions - - - -33,23533,235
  Disposals - - -(22,280) -(22,280)
  Charge for the year  - 36,987 5,322 16,609 160,420 219,338
  31 August 2009 - 127,832 291,664 45,787 1,122,607 1,587,890
   
  Net book value 
  31 August 2009 - 29,740 18,527 10,885 885,135 944,287
  31 August 2008 - 67,231 23,849 36,939 744,723 872,742
  31 August 2007 614,322 45,323 30,005 6,072 315,453 1,011,175
   
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
31 
 
13. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 
 
In May 2008 the Group’s Welsh operations and head office were centralised in new leased 
accommodation and in June 2008 Freshwater House which had previously housed the Group’s head 
office was sold. At the time of its disposal Freshwater House had a net book value of £604,646. Its sale 
yielded a gain of £126,548. This is reported as other income in the Group’s consolidated income 
statement for the year ended 31 August 2008.  
 
The net book value of assets held under outstanding finance leases included above is: 
 
    2009  2008 
   
 £ 
 
 £ 
 
  Motor vehicles  10,885 36,939
  Fittings and equipment  171,744 8,129
    182,629 45,068
 
 b) Company 
 
  
  
 Land and 
buildings 
 Plant and 
machinery 
 Motor 
Vehicles  
 Fittings and 
equipment 
 
Total  
  
 
  £  £  £  £  £ 
  Cost  
  31 August 2007 648,718 39,349 17,317 312,708 1,018,092
  Additions - - - 321,385 321,385
  Disposals (648,718) - (17,317) (27,720) (693,755)
  31 August 2008 - 39,349 - 606,373 645,722
  Acquisitions  - - - 58,780 58,780
  Additions - - - 237,029 237,029
  Disposals  -- - (58,780) (58,780)
  31 August 2009 - 39,349 - 843,402 882,751
   
   
  Depreciation          
  31 August 2007 34,396 30,293 11,907 97,748 174,344
  Charge for the year 9,676 2,021 112 52,816 64,625
  Disposals (44,072) - (12,019) (10,121) (66,212)
  31 August 2008  - 32,314 - 140,443 172,757
  Acquisitions ---33,23533,235
  Charge for the year  - 1,571 - 102,568 104,139
  Disposals  - - - (33,235) (33,235)
  31 August 2008 - 33,885 - 243,011 276,896
   
  Net book value 
  31 August 2009 - 5,464 - 600,391 605,855
  31 August 2008 - 7,035 - 465,930 472,965
  31 August 2007 614,322 9,056 5,410 214,960 843,748
   
 
During the year the Company transferred the fixed assets it acquired from Life Communications to a 
wholly owned subsidiary, Freshwater (UK Regions) Limited. See note 17.  
 
The net book value of assets held under outstanding finance leases included above is: 
 
    2009  2008 
   
 £ 
 
 £ 
 
  Fittings and equipment  171,744 -  
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
32 
 
14. INTANGIBLE FIXED ASSETS 
 
 a) Group  
   2009  2008 
   Goodwill   Other   Total   Goodwill   Other   Total  
   £  £  £  £  £  £ 
  Cost 
  Opening balance 8,948,338 81,712 9,030,050 5,356,655 66,712 5,423,367
  Business combinations  1,475,001 - 1,475,001 3,591,683 - 3,591,683
  Other 1,276 - 1,276 -15,000 15,000
  Closing balance 10,424,615 81,712 10,506,327 8,948,338 81,712 9,030,050
   
  Amortisation and impairment 
  Opening balance 30,089 58,977 89,066 30,089 57,156 87,245
  Amortisation - 4,984 4,984 - 1,821 1,821
  Closing balance 30,089 63,961 94,050 30,089 58,977 89,066
   
   
  Carrying value at end of year  10,394,526 17,751 10,412,277 8,918,249 22,735 8,940,984
  Carrying value at start of year 8,918,249 22,735 8,940,984 5,326,566 9,556 5,336,122
   
b) Company  
   2009  2008 
   Goodwill   Other   Total   Goodwill  Other  Total 
   £  £  £  £  £  £ 
  Cost  
  Opening balance 2,619,195 20,000 2,639,195 76,17120,000 96,171
  Business combinations  1,475,001 - 1,475,001 1,390,000 - 1,390,000
  Group restructuring  599,172 - 599,172 1,153,024 - 1,153,024
  Closing balance 4,693,368 20,000 4,713,368 2,619,195 20,000 2,639,195
   
  Amortisation and impairment 
  Opening balance 21,856 11,444 33,300 21,856 10,444 32,300
  Amortisation - 917 917 - 1,000 1,000
  Closing balance 21,856 12,361 34,217 21,856 11,444 33,300
   
   
  Carrying value at end of year  4,671,512 7,639 4,679,151 2,597,339 8,556 2,605,895
  Carrying value at start of year 2,597,339 8,556 2,605,895 54,315 9,556 63,871
   
 
 Changes during the year 
 
 Goodwill in the Group and Company balance sheets increased by £1,475,001 during the year as a 
 result  of the acquisition of Life Communications and the finalisation of the amount payable under the 
 earn-out arrangements associated with the acquisition of the Waterfront Partnership. Goodwill in the 
 Company’s balance sheet also changed as a result of two of the Company’s subsidiaries, Freshwater 
 Northern Limited and Freshwater Midlands Limited, transferring their trades to other Group members.
 These transfers were done so as to help the Group rationalise its legal structure and reduce its 
 administrative overheads. The transfers constituted business combinations involving entities under 
 common control. IFRS does not provide specific guidance on how such combinations should be 
 accounted for. In accounting for the transfers the carrying value in the Company’s balance  sheet of its 
 investments in the subsidiaries was reduced by the goodwill carried in the Group’s consolidated 
 balance sheet in relation to these entities. Goodwill in the Company’s balance sheet was increased by a 
 corresponding amount. The accounting which served to reflect the transfers of value between the 
 Company’s subsidiaries had no impact on goodwill recognised in Group’s consolidated balance sheet. 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
33 
14. INTANGIBLE FIXED ASSETS (CONTINUED) 
 
Impairment testing of cash generating units to which goodwill has been allocated. 
 
The Group is considered to comprise of a single cash generating unit. In accordance with the Group’s 
accounting policy the carrying value of this unit including the goodwill in the Group’s consolidated 
balance sheet has been tested for impairment. This was done in a similar manner to prior years with 
recoverable amount being taken as value in use. In calculating value in use the present value of the net 
cash flows expected to be generated over the next 10 years was considered (2008: 10 years). Expected 
future cash flows were based on the Group’s budget for the financial year ending 31 August 2010 and 
the assumption that cash flows will grow steadily thereafter at 2.5% per annum (2008: 2.5%). Present 
value was calculated using a pre-tax discount factor of 8% (2008: 7%). In determining the assumptions 
used in this year’s impairment review management considered a range of factors including the Group’s 
historic performance, the Group’s cost of capital and the approach adopted by other organisations 
within the industry. Different assumptions could have resulted in recoverable amount being calculated 
as less than carrying value and by way of example either a pre-tax discount factor of 11% or the 
assumption of a negative growth rate in subsequent year cash flows would have necessitated an 
impairment.  
 
15. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS 
 
    2009  2008 
   
 £ 
 
 £ 
 
  Opening balance   8,019,378 6,244,195
  Business combinations   - 2,928,207
  Group restructuring (note 17)  (599,172) (1,153,024)
  Dividend (see below and note 33)   (74,374) -
  Closing balance  7,345,832 8,019,378
 
The Company acquired no new subsidiaries during the year. There were no disposals. During the year 
the Company received a dividend from a wholly owned subsidiary, Freshwater London Limited. To the 
extent that this comprised a distribution of pre-acquisition profits the Company did not recognise a gain 
but instead wrote down the carrying value of its investment in Freshwater London Limited by an amount 
equal to the dividend received. 
 
16. SUBSIDIARY UNDERTAKINGS 
 
The Company owns 100% of the ordinary share capital and controls 100% of the voting rights in the 
companies below. The companies are registered in either England and Wales or Scotland and operate 
in the UK albeit that Waterfront Public Affairs Limited maintains a small operation in Brussels and 
Freshwater (UK Regions) Limited also operates in the Republic of Ireland. All are direct subsidiaries of 
the Company.  
    
  Entity Acquired Principal activity 
  Freshwater Scotland Limited November 2004 Public relations 
  Freshwater Midlands Limited June 2005 Dormant (see note 17) 
  Freshwater London Limited   December 2005 Dormant  
  Freshwater Technology Limited  March 2006 Public relations 
  Freshwater Northern Limited April 2006 Dormant (see note 17) 
  Freshwater Healthcare Limited  May 2006 Public relations 
  
Merlin Marketing and Creative Limited 
(formerly Freshwater Creative Limited)  
July 2006 Public relation and marketing services 
  Freshwater Southern Limited July 2006 Public relations 
  Freshwater Wales Limited July 2006 Dormant (see note 17) 
  Freshwater Consumer Limited  February 2007 Public relations 
  
Freshwater (UK Regions) Limited  
(formerly Lynx Public Relations Limited) 
November 2007 Public relations 
  Waterfront Conference Company Limited December 2007 Conferences 
  Waterfront Public Affairs Limited December 2007 Public relations 
  Merlin Marketing and Public Relations Limited  February 2008 Dormant (see note 17)   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
34 
 
17. BUSINESS COMBINATIONS   
 
Information on business combinations effected in the current year and on those business combinations 
effected in prior years which remained provisionally accounted for in the prior year financial statements 
is provided below. The information is organised in chronological order. 
 
  a) Freshwater (UK Regions) Limited (until May 2009 Lynx Public Relations Limited) 
 
On 1 November 2007 the Company acquired control of Freshwater (UK Regions) Limited by acquiring 
its Class A and Class B ordinary share capital in exchange for a cash payment of £350,000, the issue of 
109,890 10p ordinary shares and certain contingent consideration. The contingent consideration 
provided included the promise of a cash payment dependent on what subsequently was agreed as 
Freshwater (UK Regions) Limited’s net assets at the completion date. It also included the promise of a 
cash payment and the issue of an additional value of 10p ordinary shares dependent on Freshwater 
(UK Regions) Limited’s financial performance in the 12 months subsequent to the completion date. 
 
   1 Nov 07  31 Aug 08  31 Aug 09 
   Provisional  Provisional  Final 
   Book Adj. Fair   Fair  Fair 
   
£ 
 
£ 
 
£ 
 
 
 
£ £ 
  Assets and liabilities acquired 
  Tangible assets 585 - 585 585 585
  Stocks 1,932 - 1,932 1,932 1,932
  Debtors 326,809 - 326,809 326,809 326,809
  Cash at bank and at hand 147,499 - 147,499 147,499 147,499
  Creditors (176,658) - (176,658) (176,658) (176,658)
  Net assets acquired 300,167  300,167 300,167 300,167
  Goodwill  717,332 1,207,332 1,207,332
   1,017,499 1,507,499 1,507,499
  Cost of business combination    
  Cash 350,000 350,000 350,000
  109,890 ordinary shares 100,000 100,000 100,000
  Contingent consideration 
  Net asset payment – Cash 297,499 297,499 297,499
  Earn-out – Cash       50,000     410,000     410,000
  Earn-out – 489,796 ordinary shares  120,000 240,000 240,000
   467,499 947,499 947,499
  Direct costs  100,000 110,000 110,000
   1,017,499 1,507,499 1,507,499
 
The Company and the vendors agreed that the fair value of each of the 109,890 10p ordinary shares 
issued upon completion should be considered 91p after due regard to the quoted mid-market price of 
the Company's shares. The contingent net asset payment was agreed and made in December 2007. 
Freshwater (UK Regions) Limited’s financial performance in the 12 month earn out period led to its 
vendors receiving a cash payment of £410,000 and being issued with 489,796 10p ordinary shares 
during the year ended 31 August 2009.  
 
The goodwill associated with this business combination is not potentially deductible for tax purposes. 
 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
35 
 
17. BUSINESS COMBINATIONS (CONTINUED)   
 
 b) Waterfront Conference Company Limited   
 
On 2 December 2007 the Company acquired control of the Waterfront Conference Company Limited by
 acquiring its ordinary and preference share capital in exchange for a cash payment of £140,000, the 
issue of 30,110 10p ordinary shares and certain contingent consideration. The contingent consideration 
provided included the promise of a cash payment dependent on what subsequently was agreed as the 
Waterfront Conference Company Limited's net assets at the completion date. It further included the 
promise of a cash payment and the issue of an additional value of 10p ordinary shares dependent on 
the Waterfront Conference Company Limited's financial performance in the 15 months subsequent to 
the completion date.  
 
   2 Dec 07  31 Aug 08  31 Aug 09  
   Provisional  Provisional  Final 
   Book Adj. Fair   Fair   Fair 
   
£ 
 
£ 
 
£ 
 
 
 
£ 
 
 
  Assets and liabilities acquired 
  Tangible assets      45,740 -         45,740 45,740 45,740
  Debtors 183,905 - 183,905 253,905 253,905
  Cash at bank and at hand 2,741 - 2,741 2,741 2,741
  Creditors (247,419) - (247,419) (257,053) (257,053)
  Net (liabilities) / assets acquired (15,033)  (15,033) 45,333 45,333
  Goodwill 215,000 225,000 225,000
   199,967 270,333 270,333
  Cost of business combination  
  Cash 140,000 140,000 140,000
  30,110 ordinary shares 25,000 25,000 25,000
  Contingent consideration: 
  Net asset (clawback) / payment – cash (15,033) 45,333 45,333
  Direct costs  50,000 60,000 60,000
   199,967 270,333 270,333
 
The Company and the vendors agreed that the fair value of each of the 30,110 10p ordinary shares 
issued upon completion should be considered 83p after due regard to the quoted mid-market price of 
the Company's shares. The contingent net asset payment was agreed and paid in July 2009. The 
Waterfront Conference Company’s financial performance in the 15 month earn out period did not 
warrant a further payment of cash or the issue of further ordinary shares in the Company.  
 
The goodwill associated with this business combination is not potentially deductible for tax purposes. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
36 
 
17. BUSINESS COMBINATIONS (CONTINUED)   
 
 c) Waterfront Partnership  
 
On 2 December 2007 the Company acquired the business of the Waterfront Partnership together with 
certain of its assets and liabilities in exchange for a cash payment of £580,000, the issue of 240,876 10p 
ordinary shares and certain contingent consideration. The contingent consideration provided included 
the promise of a cash payment dependent on what subsequently was agreed as the value of the assets 
and liabilities acquired at the completion date. It further included the promise of a cash payment and the 
issue of an additional value of 10p ordinary shares dependent upon the acquired business's financial 
performance in the 15 months subsequent to completion.  
 
   2 Dec 07  31 Aug 08  31 Aug 09 
   Provisional  Provisional  Final 
   Book Adj. Fair   Fair   Fair  
   
£ 
 
£ 
 
£ 
 
 
 
£ 
 
£ 
 
  Assets and liabilities acquired 
  Tangible assets          5,767 -           5,767         5,767         5,767
  Debtors 182,474 - 182,474 182,474 182,474
  Creditors (334,135) - (334,135) (404,135) (404,135)
  Net liabilities acquired (145,894)  (145,894) (215,894) (215,894)
  Goodwill 880,000 1,390,000 1,690,000
   734,106 1,174,106 1,474,106
  Cost of business combination  
  Cash 580,000 580,000 580,000
  240,876 ordinary shares 200,000 200,000 200,000
  Contingent consideration 
  Net asset clawback  (145,894) (215,894) (215,894)
  Earn-out – Cash  - 225,000 575,000
  Earn-out – 561,098 ordinary shares  - 275,000 225,000
   (145,894) 284,106 584,106
  Direct costs  100,000 110,000 110,000
   734,106 1,174,106 1,474,106
 
The Company and the vendors agreed that the fair value of each of the 240,876 10p ordinary shares 
issued upon completion should be considered 83p after due regard to the quoted mid-market price of 
the Company's shares. The financial performance of the acquired business in the 15 month earn out 
period led to its vendors receiving a cash payment of £359,106 (after the deduction of the contingent net 
asset clawback of £215,894) and being issued with 561,098 ordinary shares during the year ended 31 
August 2009.   
 
The goodwill associated with this business combination is potentially deductible for tax purposes. 
 
d) Waterfront Public Affairs Limited 
 
On 2 December 2007 the Company transferred the business, assets and liabilities it had acquired from 
the Waterfront Partnership (see above) to a wholly owned subsidiary, Waterfront Public Affairs Limited. 
The goodwill that arose in the Company’s balance sheet as a result of the acquisition of the business 
and certain of the assets and liabilities of the Waterfront Partnership was not transferred. The transfer 
constituted a business combination involving entities under common control. IFRS does not provide 
specific guidance on how such combinations should be accounted for. In the absence of such guidance 
the assets and liabilities were transferred at book value and the trade for nil value.  
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
37 
 
17. BUSINESS COMBINATIONS (CONTINUED)   
 
e) Merlin Marketing and Public Relations Limited 
 
On 1 February 2008 the Company acquired control of Merlin Marketing and Public Relations Limited by 
acquiring its ordinary share capital in exchange for a cash payment of £300,000, the issue of 234,137 
10p ordinary shares and certain contingent consideration. The contingent consideration provided 
included the promise of an additional cash payment dependent on what subsequently was agreed as 
Merlin Marketing and Public Relations Limited’s net assets at the completion date. It further included a 
promise to issue an additional value of 10p ordinary shares dependant on the combined financial 
performance of Merlin Marketing and Public Relations Limited, Merlin Marketing and Creative Limited 
(until March 2009 Freshwater Creative Limited) and Freshwater Wales Limited in the 12 months 
subsequent to the completion date.  
 
   1 Feb 08  31 Aug 08  31 Aug 09  
   Provisional  Provisional  Final 
   Book Adj. Fair   Fair   Fair  
   
£ 
 
£ 
 
£ 
 
 
 
£ 
 
£ 
 
  Assets and liabilities acquired 
  Tangible assets         93,211 -         93,211 102,631 102,631
  Debtors 348,427 - 348,427 405,786 405,786
  Cash at bank and at hand 184,078 - 184,078 184,078 184,078
  Creditors (220,942) - (220,942) (351,742) (351,742)
  Net assets acquired      404,774       404,774 340,753 340,753
  Goodwill 695,226 759,247 759,247
   1,100,000 1,100,000 1,100,000
  Cost of business combination  
  Cash 300,000 300,000 300,000
  234,137 ordinary shares 200,000 200,000 200,000
  Contingent consideration 
  Net asset payment 400,000 400,000 400,000
  Earn-out – 253,164 ordinary shares  100,000 100,000 100,000
   500,000 500,000 500,000
  Direct costs  100,000 100,000 100,000
   1,100,000 1,100,000 1,100,000
 
The Company and the vendors agreed that the fair value of each of the 234,137 10p ordinary shares 
issued upon completion should be considered 85p after due regard to the quoted mid-market price of 
the Company's shares. The contingent net asset payment was agreed and settled in May 2008. The 
combined financial performance of Merlin Marketing and Public Relations Limited, Merlin Marketing and 
Creative Limited and Freshwater Wales Limited in the 12 month earn out period led to the vendors 
being issued 253,164 10p ordinary shares during the year ended 31 August 2009. 
 
The goodwill associated with this business combination is not potentially deductible for tax purposes. 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
38 
 
17. BUSINESS COMBINATIONS (CONTINUED)   
 
f) Merlin Marketing and Public Relations Limited / Merlin Marketing and Creative Limited (until 
   March 2009 Freshwater Creative Limited) / Freshwater Wales Limited 
 
On 31 August 2008 Merlin Marketing and Public Relations Limited transferred its marketing services 
business to Merlin Marketing and Creative Limited and its public relations business to Freshwater Wales 
Limited. All three companies are fellow wholly owned subsidiaries of the Company. Merlin Marketing 
and Public Relations has not traded since 31 August 2008 and having collected outstanding debtors 
and settled outstanding creditors in an orderly manner will be dissolved. The transferred trades continue 
as going concerns. The transfers were done so as to help the Group rationalise its legal structure and 
reduce its administrative overheads. The transfers constituted business combinations involving 
businesses under common control. IFRS does not provide specific guidance on how such combinations 
should be accounted for. In the absence of such guidance the trades were transferred for nil value. In 
recognition of the transfers the carrying value of the Company’s investment in Merlin Marketing and 
Public Relations Limited in the Company’s balance sheet was reduced by £759,247 (being the carrying 
value of goodwill in the Group’s consolidated balance sheet in relation to Merlin Marketing and Public 
Relations Limited) and goodwill in the Company’s balance sheet increased by a corresponding amount.  
 
g) Freshwater Northern Limited / Freshwater Midlands Limited / Freshwater Wales Limited  
 
On 1 March 2009 Freshwater Northern Limited transferred its trade and certain assets to Freshwater 
(UK Regions) Limited (until May 2009 Lynx Public Relations Limited), a fellow wholly owned subsidiary 
of the Company. This was followed by Freshwater Midlands Limited and Freshwater Wales Limited both 
fellow wholly owned subsidiaries of the Company transferring their trades and certain assets to 
Freshwater (UK Regions) Limited on 1 June 2009. Freshwater Northern Limited, Freshwater Midlands 
Limited and Freshwater Wales Limited have not subsequently traded and having collected outstanding 
debtors and settled outstanding creditors in an orderly manner will be dissolved. The transferred trades 
continue as going concerns. The transfers were done so as to help the Group rationalise its legal 
structure and reduce its administrative overheads. Each constituted a business combination involving 
businesses under common control. IFRS does not provide specific guidance on how such combinations 
should be accounted for. In the absence of such guidance assets were transferred at book value and 
trades for nil value. In recognition of the transfers the carrying value of the Company’s investment in 
Freshwater Northern Limited was reduced by £86,878 (being the carrying value of goodwill in the 
Group’s consolidated balance sheet in relation to Freshwater Northern Limited) and goodwill in the 
Company’s balance sheet increased by a corresponding amount. In a similar manner the carrying value 
of the Company’s investment in Freshwater Midlands Limited was reduced by £512,294 and goodwill in 
the Company’s balance sheet increased by a corresponding amount.  
 
h) Life Communications  
 
On 1 July 2009 the Company acquired the business and certain of the fixed assets of a sole trader, 
 Life Communications, in exchange for a cash payment of £300,000, the issue of 263,505 10p ordinary 
 shares and certain contingent consideration. The contingent consideration provided included the 
 promise of a cash payment dependent on the agreed value of the fixed assets acquired at the comp-
 letion date. It also included the promise of a cash payment dependent on the financial performance 
 of the acquired business in the first year subsequent to completion and the promise of a further cash 
 payment dependent on the financial performance of the acquired business in the second year 
 subsequent  to completion. Up to 40% of the value of these cash payments may at the option of the 
 Company be settled by the issue of 10p ordinary shares at the average quoted mid-market price of the 
 Company’s shares in the last month of the respective earn out periods.  
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
39 
 
17. BUSINESS COMBINATIONS (CONTINUED)   
 
h) Life Communications (continued) 
 
   1 July 09  31 Aug 09   
   Provisional  Provisional   
   Book Adj. Fair   Fair    
   
£ 
 
£ 
 
£ 
 
 
 
£ 
 
 
  Assets acquired 
  Fixed assets  25,545 - 25,545 25,545 
  Net assets acquired  25,545 - 25,545 25,545
  Goodwill 1,175,000 1,175,000
   1,200,545 1,200,545
  Cost of business combination  
  Cash 300,000 300,000
  263,505 ordinary shares 100,000 100,000 
  Contingent consideration  
  Fixed asset payment – Cash  25,545 25,545
  Earn-out – Cash (year 1) – Estimate 350,000 350,000
  Earn-out – Cash (year 2) – Estimate 350,000 350,000
   725,545 725,545
  Direct costs – Estimate 75,000 75,000
   1,200,545 1,200,545
 
The Company and vendor agreed that the fair value of each of the 263,505 10p ordinary shares issued 
upon completion should be considered 37.9p after due regard to the quoted mid-market price of the 
Company’s shares. The contingent fixed asset payment was agreed and paid in September 2009. The 
estimates of the cash payments that will be made as a result of the earn out arrangements are on the 
expectation that the acquired business go through the top of its earn-out targets. Reduced amounts will 
be payable if this proves not to be the case. 
 
The goodwill associated with this business combination is potentially deductible for tax purposes. 
 
The acquired business contributed £152,841 to the Group’s revenue and £104,610 to the Group’s profit 
before income tax for the year ended 31 August 2009.  
 
i) Freshwater (UK Regions) Limited 
 
On 1 July 2009 the Company transferred the business and fixed assets it had acquired from Life 
Communications (see above) to a wholly owned subsidiary, Freshwater (UK Regions) Limited. The 
goodwill that arose in the Company’s balance sheet as a result of the acquisition of the business and 
certain of the fixed assets of Life Communications was not transferred. The transfer constituted a 
business combination involving entities under common control. IFRS does not provide specific guidance 
on how such combinations should be accounted for. In the absence of such guidance the fixed assets 
were transferred at book value and the trade for nil value.  
 
 
 
 
 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
40 
 
18. FINANCIAL ASSETS AND LIABILITIES 
 
 The tables below analyse the carrying value of financial assets and financial liabilities in the Group 
 and Company balance sheets. Further information on the classes that make up each category is 
 provided in  the notes indicated. The carrying value of each category is considered a reasonable 
 approximation of its fair value. Other than borrowings all amounts are due within one year. A 
 maturity analysis of the Group’s and Company’s borrowings is provided in note 24.  
 
 a) Group 
 
    2009  2008 
   Note 
£ 
 
 £ 
 
    
  Trade receivables 19 1,639,798 1,949,491
  Other receivables 19 12,722 12,879
  Cash and cash equivalents  21 - 1,077,633
  Loans and receivables  1,652,520 3,040,003
    
  Financial assets   1,652,520 3,040,003
    
  Bank overdraft 21 3,421 -
  Trade payables 22 752,886 494,783
  Other payables and accruals  22 414,465 298,796
  Borrowings  24 852,297 1,039,725
  Financial liabilities at amortised cost   2,023,069 1,833,304
    
  Derivative financial instrument 23 87,000 30,049
  Financial liabilities at fair value through profit or loss  87,000 30,049
    
  Financial liabilities   2,110,069 1,863,353
 
 b) Company  
 
    2009  2008 
   Note 
£ 
 
 £ 
 
  Amounts owed by Group undertakings  19 909,815 1,139,400
  Cash and cash equivalents  21 - 499,377
  Loans and receivables  909,815 1,638,777
    
  Financial assets   909,815 1,638,777
    
  Bank overdraft 21 1,644,909 892,964
  Trade payables 22 197,808 125,192
  Other payables and accrued expenses 22 167,683 51,584
  Amounts owed to Group undertakings  22 654,609 1,508,430
  Borrowings 24 842,177 1,010,683
  Financial liabilities at amortised cost   3,507,186 3,588,853
    
  Derivative financial instrument 23 87,000 30,049
  Financial liabilities at fair value through profit or loss  87,000 30,049
    
  Financial liabilities   3,594,186 3,618,902
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
41
 
18. FINANCIAL ASSETS AND LIABILITIES (CONTINUED) 
 
During the year ended 31 August 2009 the Group and the Company faced credit risk, interest rate risk 
and liquidity risk as a result of their financial assets and liabilities. Neither faced significant currency risk 
being the risk that the fair value or future cash flows of a financial instrument will fluctuate because of 
changes in foreign exchange rates. There were no significant changes in the risks, the objectives, 
processes and policies for managing the risks or the methods used to measure the risks during the year 
ended 31 August 2009. 
 
Credit risk  
 
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party 
by failing to discharge an obligation. The Group faces credit risk as a result of offering credit terms to its 
customers and holding cash and cash equivalents with financial institutions. The Company faces credit 
risk as a result of advancing funds to other Group members and as a result of holding cash and cash 
equivalents with financial institutions. The Group seeks to mitigate the risk that arises from offering 
credit terms by performing credit checks before terms are advanced and thereafter actively monitoring 
amounts receivable and denying additional credit when appropriate. Funds advanced by the Company 
to other Group members are repayable on demand. The Company looks to mitigate the risk that arises 
from advancing such funds by monitoring Group members’ financial position and performance on an 
ongoing basis and denying additional credit where appropriate. The risk that arises as a result of holding 
cash and cash equivalents with financial institutions is mitigated by both the Group and the Company 
holding the majority of such amounts with the same recognised UK high street bank that provides the 
Group’s overdraft facility and that provided the Company’s floating rate borrowings. Both the Group’s 
and the Company’s maximum exposure to credit risk is equal to the value of loans and receivables. 
 
 Interest rate risk  
 
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate 
because of changes in market interest rates. The Group and the Company primarily face interest rate 
risk as a result of the Company’s floating rate borrowings, a derivative contract entered into by the 
Company and through holding cash and cash equivalents with financial institutions. See notes 21, 23 
and 24. 
  
 Liquidity risk 
 
 Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with 
 financial liabilities. The Group’s financial liabilities include its borrowings and trade and other payables. 
 See notes 22 and 24. Within the Group the responsibility for monitoring liquidity risk and for ensuring 
 that Group members are adequately funded has been centralised and lies with the ultimate parent 
 undertaking, Freshwater UK Plc, which leads all capital raising activities. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
42
 
19. TRADE AND OTHER RECEIVABLES 
 
    Group   Company 
   
 
2009 
 2008 
Restated* 
 2009   2008 
Restated* 
   
 £ 
 
 £ 
 
 £ 
 
 £ 
 
  Gross trade receivables 1,667,763 1,980,246 - -
  Provision for impairment  (27,965) (30,755) - -
  Unimpaired trade receivables 1,639,798 1,949,491 - -
  Accrued income  436,374 215,053 3,327 3,327
  Prepayments  207,085 174,256 47,961 55,837
  Other receivables 12,722 12,879 - -
  Amounts owed by Group undertakings - - 909,815 1,139,400
  2,295,979 2,351,679 961,103 1,198,564
 
* See note 5 
 
None of the balances bear interest. An aged analysis of unimpaired trade receivables is provided below. 
An amount is considered past due if the counterparty has failed to make payment when contractually 
due. All other receivables are due within one year.  
 
       Past due but not impaired 
   
 
Total 
 
Not past 
due or 
impaired  < 30 days  
30-60 
days  
60-90 
days  > 90 days  
   
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
  31 August 2009 1,639,798 785,560 558,035 194,360 87,338 14,505
     
  31 August 2008  1,949,491 831,507 740,403 244,935 80,199 52,447
 
An analysis of the movement in the provision for impairment is provided below. During the year ended 
31 August 2008 £155,807 owed by a client in the property sector was written off following it being 
placed into administration. 
 
    Group  Group      
    2009  2008     
   
 £ 
 
 £ 
 
    
  Opening balance 30,755 -
  Acquisitions 27,743 33,052
  Provision for impairment  - 186,065
  Trade receivables written off  (30,533) (188,362)
  Closing balance  27,965 30,755
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
43 
 
20. DEFERRED CONSIDERATION  
 
    Group   Company 
    2009  2008  2009   2008 
   
 £ 
 
 £ 
 
 £ 
 
 £ 
 
  Receivable  
  Due in 1 year  - 215,894 - 215,894
   
  Payable  
  Due in 1 year 350,000 - 375,545 -
  Due in more than 1 year but less than 2 years 350,000 680,333 350,000 680,333
   700,000 680,333 725,545 680,333
 
 Deferred consideration payable of £700,000 at 31 August 2009 is the Group’s best estimate of the value 
 it will have to pay as a result of the earn-out arrangements associated with the Company’s purchase 
 of the business and assets of Life Communications. See note 17. The Group had no other outstanding 
 earn-out related obligations. 
 
21. CASH AND CASH EQUIVALENTS 
 
    Group   Company 
    2009  2008  2009  2008  
   
 £ 
 
 £ 
 
 £ 
 
 £ 
 
  Current account balances (3,421) 578,256 (1,644,909) (892,964)
  Short term deposits - 499,377 - 499,377
  (3,421) 1,077,633 (1,644,909)     (393,587)
  
Each group member’s primary current account is with the same recognised UK high street bank. On 31 
August 2009 a group overdraft facility was in place under which the aggregate of the balances on these 
accounts could be overdrawn by up to £400,000 subject to the aggregate of individual overdrawn 
balances not exceeding £2.3 million. Interest was payable at 1.75% above the counterparty bank’s base 
rate on any aggregate overdraft. Interest was receivable at 0% on any aggregate debtor balance. This 
facility was replaced in January 2010. The new facility allows the aggregate of the balances on group 
members’ primary current accounts to be overdrawn by up to £600,000 until 28 February 2010 and 
thereafter by up to £530,000 until 31 August 2010. Interest is payable at 4% above the counterparty 
bank’s base rate on any aggregate overdraft. Interest is receivable at 0% on any aggregate debtor 
balance. Any aggregate overdraft is secured by unlimited intercompany composite guarantees (under 
which Group members are jointly and severally liable for amounts outstanding) and various debentures 
by Group members in favour of the counterparty bank. The new facility is subject to the Group satisfying 
certain financial covenants and will be subject to review on at least an annual basis. Subsequent to 31 
August 2010 the maximum permitted overdraft will decline in monthly steps of £30,000 to £400,000. 
 
22. TRADE AND OTHER PAYABLES 
 
    Group   Company 
    2009  2008  2009   2008 
   
 £ 
 
 £ 
 
 £ 
 
 £ 
 
  Trade payables 752,886 494,783 197,808 125,192
  Other taxes and social security  270,421 550,053 72,557 116,133
  Other payables and accrued expenses 414,465 298,796 167,683 51,584
  Deferred income  116,852 139,598 - -
  Amounts owed to Group undertakings - - 654,609 1,508,430
  1,554,624 1,483,230 1,092,657 1,801,339
 
None of the above balances is interest bearing. All are payable within one year.  
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
44
 
23. DERIVATIVE FINANCIAL INSTRUMENTS  
 
    Group   Company 
    2009  2008  2009   2008 
   
 £ 
 
 £ 
 
 £ 
 
 £ 
 
  Derivative financial liabilities  87,000 30,049 87,000 30,049
 
In March 2007 the Company entered a free standing ten year sterling denominated amortising base rate 
swap to mitigate the Group’s exposure to interest rate risk as a result of the Company’s floating rate 
borrowings. Under the swap which had an initial nominal value of £900,000 the Company pays interest 
at a fixed rate of 5.6% in exchange for the counterparty bank's (floating) base rate. The swap is carried 
in the Company’s and the Group’s balance sheet at fair value as determined by the counterparty. It 
does not qualify for hedge accounting and associated gains or losses are recognised in the Group’s 
consolidated income statement under administrative expenses.  
 
24. BORROWINGS 
 
  31 August 2009 
 
Current  
> 1 but 
< 2 yrs  
> 2 but 
< 5 yrs  > 5 yrs  
Non 
current  Total 
   £  £  £  £  £  £ 
  Fixed rate   
  £76,744 finance lease 42,486 20,465 13,793 - 34,258 76,744
  £95,000 finance lease  35,751 38,709 20,540 - 59,249 95,000
  Various finance leases  10,120 - - - - 10,120
   88,35759,17434,333-93,507 181,864
    
  Floating rate   
  £1.2 million term loan 304,252 228,189 - - 228,189 532,441
  £180,000 term loan 27,715 36,249 74,028 - 110,277 137,992
   331,967264,43874,028-338,466 670,433
   
  Company  410,204 323,612 108,361 - 431,973 842,177
  Other Group members 10,120 - - - - 10,120
   420,324323,612108,361-431,973852,297
 
  31 August 2008 
 
Current  
> 1 but 
< 2 yrs  
> 2 but 
< 5 yrs  > 5 yrs  
Non 
current  Total 
   £  £  £  £  £  £ 
  Fixed rate   
  Various finance leases 14,521 14,521 - - 14,521 29,042
    
  Floating rate  
  £1.2 million term loan 304,252 304,252 228,181 - 532,433 836,685
  £180,000 term loan 31,592 33,875 108,531 - 142,406 173,998
  335,844 338,127 336,712 - 674,839 1,010,683
   
  Company  335,844 338,127 336,712 - 674,839 1,010,683 
  Other Group members  14,521 14,521 - - 14,521 29,042
  Total  350,365 352,648 336,712 - 689,360 1,039,725 
 
 
 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
45 
 
24. BORROWINGS (CONTINUED) 
 
The above amounts exclude interest. The Group’s borrowings on 31 August 2009 and 31 August 2008 
with the exception of ‘Various finance leases’ lay entirely within the Company. Carrying value is 
considered a fair proxy of fair value.  
 
The Group’s borrowings on 31 August 2009 with the exception of ‘Various finance leases’ were with a 
single counterparty bank and secured by unlimited intercompany composite guarantees (under which 
Group members are jointly and severally liable for amounts outstanding) and various debentures by 
Group members in favour of the counterparty bank. The amounts outstanding under the finance leases 
entered into during the year ended 31 August 2009 are additionally secured against certain of the 
Group’s fixed assets. The interest rates and repayment terms associated with the Group’s borrowings 
on 31 August 2009 were: 
 
   Interest rate   Repayment terms  
  Fixed rate    
  £76,000 finance lease  8%  Level monthly payments of capital and interest over 2.5 years 
  £95,000 finance lease   8%  Level monthly payments of capital and interest over 2.5 years 
  Various lease and HP   Various  Various 
       
  Floating rate      
  £1.2 million term loan  Base + 2.25%  Quarterly capital payments over 4 years 
  £180,000 term loan  Base + 2%  Level monthly payments of capital and interest over 5 years 
 
In January 2010 the Group agreed an amendment to the £1.2 million term loan it entered in February 
2007. At the date of the amendment £380,307 remained outstanding. This is now repayable in monthly 
instalments of £25,353 starting January 2011. The Group’s borrowings have otherwise remained 
unchanged since 31 August 2009.  
 
In March 2007 the Company entered a free standing ten year sterling denominated amortising base rate 
swap to mitigate the Group’s exposure to interest rate risk as a result of its floating rate borrowings. 
Since entering the swap the Group has been exposed to interest rate risk through its floating rate 
borrowings to the extent that they have exceeded the swap’s amortised nominal value. See note 23. 
 
In March 2007 the Company entered a free standing ten year sterling denominated amortising base rate 
swap to mitigate the Group’s exposure to interest rate risk as a result of its floating rate borrowings. 
Since entering the swap the Group has been exposed to interest rate risk through its floating rate 
borrowings to the extent that they have exceeded the swap’s amortised nominal value. See note 23. 
 
     2009  2008  2007   
   
  £ 
 
 £  £   
  Floating rate borrowings 670,433 1,010,683 1,631,822 
  Amortised nominal value of swap at year end  (823,873) (863,425) (892,708) 
   (153,440) 147,258 739,114
 
The table below is indicative of the extent to which the Group’s reported profit before income tax would 
have been greater / (lower) as a result of the Company’s floating rate borrowings had interest rates 
differed during the last two financial years taking into account the effect of any hedging arrangements. 
During 2009 the Company was fully hedged. 
 
      
   2009  2008 
  Had interest rates been: 
£ 
 
 £ 
 
  100 basis points higher - (4,431)
  500 basis point higher - (22,159)
  100 basis points lower - 4,431
  500 basis points lower - 22,159  
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
46 
 
25. OPERATING LEASE COMMITMENTS  
 
 The minimum lease payments under non-cancellable operating leases were as follows: 
  
    Group   Company 
    2009  2008  2009  2008 
   
 £ 
 
 £ 
 
 £ 
 
 £ 
 
  Payable < 1 year 324,514 373,239 131,706 131,706
  Payable > 1 year < 5 years 681,262 886,743 340,241 471,947
   1,005,776 1,259,982 471,947 603,653
 
The disclosed values relate to operating leases entered into in order to occupy office premises.  
 
26. DEFERRED TAXATION 
 
    Group   Company 
    2009  2008  2009   2008  
   
 £ 
 
 £ 
 
 £ 
 
 £ 
 
  Opening balance 42,719 38,070 30,925 33,440
  Charge for the year  21,798 4,649 17,612 (2,515)
  Closing balance 64,517 42,719 48,537 30,925
 
The provision for deferred taxation relates primarily to capital allowances.  
 
27. SHARE CAPITAL  
 
   Authorised 
Allotted, called up and 
fully paid 
   Ordinary Ordinary 
   
No 
 
Par No 
 
Par 
  31 August 2007  20,000,000 10p 11,153,001 10p 
  Authorised / issued  - 1,416,013 
  31 August 2008  20,000,000 10p 12,569,014 10p 
  Authorised / issued  - 2,873,444 
  31 August 2009  20,000,000 10p 15,442,458 10p 
 
Changes since 31 August 2008 
 
In November 2008 489,796 ordinary shares were issued to the vendors of Freshwater (UK Regions) 
Limited (until May 2009 Lynx Public Relations Limited) at a deemed issue price of 49p each.  
 
In April 2009 253,164 ordinary shares were issued to the vendors of Merlin Marketing and Public 
Relations Limited at a deemed issue price of 39.5p each.   
 
In May 2009 561,098 ordinary shares were issued to the vendors of the business of the Waterfront 
Partnership at a deemed issue price of 40p each.  
 
In July 2009 263,505 ordinary shares were issued to the vendors of the business of Life 
Communications at a deemed issue price of 38p each. 
 
In July 2009 the Company raised additional funding by placing 1,305,881 new ordinary shares at 36p 
with multiple investors.  
 
28. SHARE PREMIUM  
 
 During the year £29,628 of costs directly attributable to the issue of ordinary shares in the Company 
were capitalised within the share premium account (2008: £44,685).      
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
47
 
29. DIVIDENDS 
 
   
 £ 
 
  Paid during the year ended 31 August 2008: 
  Final 2006/07 ordinary dividend at 1.514p per qualifying share 174,680
  Interim 2007/08 ordinary dividend at 1.5p per qualifying share 188,536
   363,216
 
   
 £ 
 
  Paid during the year ended 31 August 2009: 
  Final 2007/08 ordinary dividend at 1.5p per qualifying share 195,882
  Interim 2008/09 ordinary dividend at 0.75p per qualifying share 104,049
   299,931
 
The Directors have proposed a final ordinary dividend of 0.5p for the year (2008:1.5p). This will be 
accounted for as an appropriation of retained earnings when paid and is not reflected in these financial 
statements.  
 
30. SHARE OPTIONS  
 
 The Company entered into share option contracts with employees of the Group under the umbrella of 
an Enterprise Management Incentive Scheme in February 2005, January 2006, July 2006, July 2007 
and June 2008. The contracts provide employees with the option to acquire ordinary shares in the 
Company at a fixed exercise price. An employee’s ability to exercise this option is not subject to any 
vesting criteria other than the passage of time and his or her continued employment by the Group. 
Exceptionally the occurrence of certain defined control events may cause the options under the 
contracts to fully vest immediately. All the contracts have a ten year term and lapse inter alia upon an 
employee either giving or receiving notice of the termination of his or her employment with the Group. 
Any obligations arising under the contracts are to be settled by the Company through the issue of new 
shares at the relevant exercise price.  
 
 Year ended 31 August 2009 
      Exercisable 
Date of grant  31-Aug-08 Grant  Lapse  Exercised 31-Aug-09 
Exercise 
price From To 
         
Tranche 1 8,167 - (333) - 7,834 62.5p  Jul-07 Feb-15 
Tranche 2 8,167 - (333) - 7,834 62.5p Jul-08 Feb-15 
Tranche 3 8,166 - (334) - 7,832 62.5p Jul-09 Feb-15 
Feb-05 24,500 - (1,000) - 23,500    
         
Tranche 1 3,832 - (500) - 3,332 75p Jan-07 Jan-16 
Tranche 2 3,836 - (500) - 3,336 75p Jan-08 Jan-16 
Tranche 3 3,832 - (500) - 3,332 75p Jan-09 Jan-16 
Jan-06 11,500 - (1,500) - 10,000    
         
Tranche 1      13,833 - (2,000) - 11,833 87.5p Jul-08 Jul-16 
Tranche 2      13,833  - (2,000) - 11,833 87.5p Jul-09 Jul-16 
Tranche 3      13,834  - (2,000) - 11,834 87.5p Jul-10 Jul-16 
Jul-06      41,500  - (6,000) - 35,500    
         
Tranche 1 20,100 - (6,233) - 13,867 82p Jul-08 Jul-16 
Tranche 2 20,100 - (6,233)  - 13,867 82p Jul-09 Jul-16 
Tranche 3 20,100 -  (6,234)  - 13,866 82p Jul-10 Jul-16 
Jul-07 60,300 - (18,700) - 41,600    
         
Tranche 1 87,400 - (28,000) - 59,400 85p Jun-09 Jun-18 
Tranche 2 87,400 - (28,000) - 59,400 85p Jun-10 Jun-18 
Jun-08 174,800 - (56,000) - 118,800    
         
Total    312,600 - (83,200) - 229,400      
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
48 
 
30. SHARE OPTIONS (CONTINUED) 
 
 Year ended 31 August 2008   
      Exercisable 
Date of grant  31-Aug-07 Grant  Lapse  Exercised 31-Aug-08 
Exercise 
price From To 
         
Tranche 1        9,500  - (333) (1,000) 8,167 62.5p   Jul-07 Feb-15 
Tranche 2        9,500  - (1,333) - 8,167 62.5p Jul-08 Feb-15 
Tranche 3        9,500  - (1,334) - 8,166 62.5p Jul-09 Feb-15 
Feb-05      28,500  - (3,000) (1,000) 24,500    
         
Tranche 1        6,832  - (3,000) - 3,832 75p Jan-07 Jan-16 
Tranche 2        6,836  - (3,000) - 3,836 75p Jan-08 Jan-16 
Tranche 3        6,832  - (3,000) - 3,832 75p Jan-09 Jan-16 
Jan-06      20,500  - (9,000) - 11,500    
         
Tranche 1      17,000  - (3,167) -      13,833 87.5p Jul-08 Jul-16 
Tranche 2      17,000  - (3,167) -      13,833  87.5p Jul-09 Jul-16 
Tranche 3      17,000  - (3,166) -      13,834  87.5p Jul-10 Jul-16 
Jul-06      51,000  - (9,500) -      41,500     
         
Tranche 1      30,666  - (10,566) - 20,100 82p Jul-08 Jul-16 
Tranche 2      30,667  - (10,567)  - 20,100 82p Jul-09 Jul-16 
Tranche 3      30,667  -  (10,567)  - 20,100 82p Jul-10 Jul-16 
Jul-07      92,000  - (31,700) - 60,300    
         
Tranche 1 - 87,400 - - 87,400 85p Jun-09 Jun-18 
Tranche 2 - 87,400 - - 87,400 85p Jun-10 Jun-18 
Jun-08 - 174,800           -  - 174,800    
         
Total    192,000  174,800 (53,200) (1,000)    312,600    
 
 The Company determines the fair value of the share option contracts it enters on the grant date, adjusts 
this to reflect its expectation of the options that will ultimately vest and then expenses the calculated 
balance on a straight line basis through its income statement over the expected vesting period with a 
corresponding credit to its share option reserve. Subsequent changes to the expectation of the number 
of options that will ultimately vest are dealt with prospectively such that the cumulative amount charged 
to the income statement is consistent with latest expectations. Subsequent changes in what is 
considered to have been the fair value of options at the grant date do not impact the amount charged to 
the income statement. 
 
The Company determines the fair value of the share option contracts it enters using the recognised 
Black-Scholes-Merton methodology. In determining the fair value of the contracts it has entered into the 
Company made the following assumptions (ranges are provided in those instances where values differ 
across tranches). Expected volatility was determined with reference to historical experience. 
 
    All tranches 
    Feb-05 Jan-06 Jul-06 Jul-07 Jun-08 
Share price    88p 88p 88p 93p 47.5p 
Exercise price     63p 75p 88p 82p 85p 
Expected life of option    3-5 yrs 4-6 yrs 4-6 yrs 4-6yrs 3-4yrs 
Expected volatility    30% 30% 30% 30% 40% 
Expected dividend yield    2.8% 2.8% 2.8% 2.8% 2.8% 
Risk free interest rate    5.4% 5.4% 5.4% 5.4% 5.4% 
         
Fair value at date of grant     29p-31p 23p-26p 19p-22p 22p-26p nil 
 
 There is no share based payment charge in either the current or the prior year as the market value of 
 the Company’s shares is significantly lower than the exercise price of recent option contracts. 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
49 
 
31. EARNINGS PER SHARE 
 
 Basic earnings per share 
    2009  2008 
   
 £ / no. 
 
 £ / no. 
 
  Profit attributable to ordinary shareholders  205,599 746,662
  Weighted average number of ordinary shares  13,411,534 11,926,396
    
  Basic earnings per share   1.53p 6.26p
 
Diluted earnings per share 
    2009  2008 
   
 £ / no. 
 
 £ / no. 
 
  Profit attributable to ordinary shareholders (diluted)  205,599 746,662
     
  Weighted average number of ordinary shares  13,411,534 11,926,396
  Adjustment - Share options  - 4,083
  Adjustment – Business combinations - Contingent share consideration  657,713 947,368
  Weighted average number of ordinary shares (diluted)   14,069,247 12,877,847
    
  Diluted earnings per share   1.46p 5.79p
 
Diluted earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the 
weighted average number of ordinary shares outstanding after adjusting these amounts for the effects 
of dilutive potential ordinary shares. Contingent share consideration is taken into account from the 
earlier of the beginning of the period and the date of the related business combination to the extent that 
the relevant conditions have been met by the balance sheet date and the consideration is dilutive. In 
calculating diluted earnings per share for the year ended 31 August 2009 and the year ended 31 August 
2008 the share option contracts entered into by the Company in February 2005, January 2006, July 
2006, July 2007 and June 2008 were considered antidilutive due to the exercise price being greater 
than the Company’s recent share price.  
 
32  CAPITAL MANAGEMENT 
 
 Capital is defined as equity plus borrowings. The Group’s capital structure is driven by the parent 
company which leads all capital raising activities. The Group is not subject to any externally imposed 
capital requirements. In managing its capital structure the Group seeks inter alia to provide 
shareholders with returns commensurate with its stated strategy. The Group refers to a variety of ratios 
when considering its capital structure including the gearing ratio defined as borrowings divided by total 
capital and interest cover defined as operating profit divided by net interest expense. The table below 
identifies these ratios at the end of the current and prior financial year. It should be noted that these 
ratios are dynamic and that in the case of the Group which is growing and whose capital structure is 
constantly evolving are best considered over a period of time as opposed to at a given point in time.   
 
    2009  2008 
   
 £ 
 
 £ 
 
  Borrowings   852,297 1,039,725
  Equity   9,947,588 9,551,621
  Capital   10,799,885 10,591,346
       
  Gearing ratio  7.9% 9.8%
     
  Interest cover   3.7 27.6
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
50 
 
33. RELATED PARTY DISCLOSURES 
 
 a) Group 
 
 Key management personnel 
 
The Group's key management personnel are those persons having the authority and responsibility for 
planning, directing and controlling the significant elements of the Group's activities. Details of the 
compensation that became payable during the year to the Group's key management personnel are 
provided below: 
 
   
 Directors of the 
Company 
 
Other 
    2009  2008  2009  2008 
   
 £ 
 
 £ 
 
 £ 
 
 £ 
 
  Wages and salaries 447,832 432,711 587,659 621,380
  Social security costs  43,542 47,233 68,681 71,668
  Other pension costs  17,751 18,223 69,812 49,103
   509,125 498,167 726,152 742,151
 
 Other 
 
John Underwood a Director of the Company owns 25% of Verita (The Inquiry Consultancy Limited), a 
customer of the Group which accounted for 1% of the Group’s turnover (2008: 1.0%). On 31 August 
2009 Verita owed the Group £nil (2008: £47,747). 
 
b) Company 
 
 Key management personnel 
 
The Company considers its key management personnel to be its Directors. Details of the compensation 
that became payable during the year to the Company’s Directors are disclosed above. The highest paid 
Director received compensation (including pension contributions) of £105,047 (2008: £104,076). During 
the year contributions became payable by the Group in relation to the money purchase pension of 4 
Directors (2008: 4). The contributions that became payable by the Group in relation to the highest paid 
Director amounted to £5,189 (2008: £4,956). 
 
Transactions with other Group members  
 
On 2 December 2007 the Company acquired the business and assets of the Waterfront Partnership and 
then immediately transferred them to Waterfront Public Affairs Limited. On 1 July 2009 the Company 
acquired the business and assets of Life Communications, a sole trader, and then immediately 
transferred them to Freshwater (UK Regions) Limited. Further information is provided in note 17.  
 
Since 1 September 2006 the Company has functioned as a service company providing labour and 
administrative services to other Group members. The Company is the Group’s sole employer. During 
the year ended 31 August 2008 the Company charged other Group members £4,099,365 (2008: 
£3,156,347) for the provision of labour and £914,846 (2008: £482,543) for the provision of 
administrative services. The Company additionally settled other Group members’ VAT liabilities and 
received dividends in aggregate of £729,680 from other Group members (2008: £650,000). These 
amounts were settled in full by the year end. To the extent that dividends received by the Company 
have comprised distributions of pre-acquisition profits the Company has not recognised a gain but has 
instead correspondingly written down the value of its investments. See note 15. 
 
 
 
 
   
FRESHWATER UK PLC 
This draft produced on 20/11/2006   18:22 
NOTES TO THE FINANCIAL STATEMENTS  
FOR THE YEAR ENDED 31 AUGUST 2009 (CONTINUED) 
51 
 
33. RELATED PARTY DISCLOSURES (CONTINUED) 
 
 The table below shows the amounts outstanding at the year end between the Company and other 
Group members. The movement on prior year balances is the result of cash transfers to/from the 
Company from/to other Group members.   
 
 
  
 
 
   
 Amounts owed by 
Group undertakings 
 Amounts owed to Group 
undertakings 
    2009  2008  2009  2008 
   
 £  £ 
 
 £ 
 
 £ 
 
  Freshwater Scotland Limited 547,479 410,474 - -
  Freshwater Midlands Limited - - 4,472 70,802
  Freshwater London Limited  - - - 131,199
  Freshwater Technology Limited 75,832 153,595 - -
  Freshwater Northern Limited - 68,678 - -
  Freshwater Healthcare Limited - - 40,475 314,900
  
Merlin Marketing and Creative Limited 
(formerly Freshwater Creative Limited) 
133,765 305,375 - -
  Freshwater Southern Limited 77,880 124,518 - -
  Freshwater Wales Limited - 36,294 211 -
  Freshwater Consumer Limited - - 156,610 551,279
  
Freshwater (UK Regions) Limited 
(formerly Lynx Public Relations Limited) 
73,756 - - 290,440
  Waterfront Conference Company Limited 780 35,247 - -
  Waterfront Public Affairs Limited 323 - - 149,810
  Merlin Marketing and PR Limited  - 5,219 452,841 -
   909,815 1,139,400 654,609 1,508,430 Company Information 
Directors M-L Windeler (Non-executive Chairman)
S B Howell (Chief Executive)
E G Carter  (Non-executive Director)
J H Evans  (Finance Director)
J M Underwood (Executive Director)
Secretary K J Tilley
Company number 4059741 (England and Wales)
Registered office Raglan House
Cardiff Gate Business Park
Cardiff
CF23 8BA
Auditors PKF (UK) LLP
18 Park Place
Cardiff
CF10 3PD
Bankers Royal Bank of Scotland
South Wales Commercial Office
3rd Floor
One Kingsway
Cardiff
CF10 3AQ
Nominated advisor and broker Charles Stanley Securities
25 Luke Street
London
EC2A 4AR
Registrars Capita Registrars Plc
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 OLA
Solicitors Martineau
1 Colmore Square
Birmingham
B4 6AA
FW Annual Report 09 Cover:Layout 2  29/1/10  13:00  Page 3 09
UK PLC
Annual Report and Accounts 
FW Annual Report 09 Cover:Layout 2  29/1/10  13:00  Page 1