Water Hall Group Plc

AGM Statement

Your Company has a strong balance sheet with cash and listed investments in excess of £4.0 million and net assets in excess of 10p per share, when a 1.76p per share surplus arising from a recent external valuation of the Group's landfill resources not reflected in the balance sheet is included.

As matters presently stand, the longevity of the Company's existing operational activities, and therefore the sustainable and future growth in its income and earnings capability depend to a large degree on the ability to secure additional planning consents for the Group's remaining operating assets, which are centred on the Bunkers landfill and topsoil recovery operation. Currently, your board is pursuing an appeal to the Secretary for State in respect of a planning application, refused last December by Hertfordshire County Council, to vary a pre-existing planning consent to enable the development of a 'state-of-the-art' materials recycling centre. Given that the Company's operation has been involved for over 60 years in gravel extraction and waste management, the site's ideal geographical position in relation to its customer base, and the recognised need for modern waste processing and recycling facilities in Hertfordshire, your board and its relevant advisers believe that the planning appeal has merit.

Now that the Southfield Wood landfill site has ceased infilling, the objective is to return the site to the best possible quality agricultural land consistent with that in the locality. Your board believes that the future for agricultural land looks positive both in terms of demand and value and therefore every effort is being made to maximise that value.

As your board had suggested, 2007 proved to be a difficult year on the trading front with the cessation of activities at Southfield Wood in the first quarter and the decision to close the collections business. The reduction in the size of the operating business means that the high levels of cash generation of the past few years cannot be sustained without a broadening of the operational capability; hence the board's pursuit of a variation to the pre-existing planning consent mentioned earlier.

In November of last year, your board made an investment in Petards Group plc, an AIM listed company specialising in providing security and surveillance systems both in the UK and USA. We continue to monitor the performance of Petards and the potential for the investment to add value to the Water Hall Group.

Turning to our management objectives for 2008, maximising the returns from Bunkers Hill Landfill remains a priority. The operating unit has undergone a rigorous downsizing of staffing levels, both in 2007 and the first quarter of 2008. The business serves the construction industry and the impact of the 'credit crunch' is already being felt with input volumes proving erratic. To counter this, management is targeting projects expected to have a more immediate impact on sales.

Your board does not expect to make a decision during 2008 in respect of the Company making a planning application relating to the minerals reserves owned or controlled at Bunkers South and Broad Green. However, the status of the Hertfordshire Local Minerals Plan, adopted by the County Council two years ago, is kept constantly under review, in particular for any shortfall of production against demand and any failure of the approved sites to come forward for planning consent.

In the event that the appeal in respect of the Materials Recycling Facility does not succeed, it will be your board's intention to seek alternative uses for the land and buildings north of the B158, in particular those buildings which enjoy pre-1947 consented uses. While new planning consents will likely be required, it would be the intention that any planning applications fall within 'green belt' policy.

Your board believes that the Company's strong balance sheet and cash position coupled with the recent drop in asset values of many other companies as a consequence of the 'credit crunch' and the uncertainty this has created in markets, provides the best conditions for some years to acquire good businesses at realistic prices. The objectives are two-fold; first to lessen the Group's dependence upon the earnings and cash generative capabilities of the existing waste management activity, and second to acquire a business which has the ability to be developed both organically and through complementary acquisitions, in turn providing the Group with a platform for sustainable growth.

A number of acquisitions have already been reviewed and considered unsuitable on the grounds of the quality of the business or price. However, your board remains active in the area of acquisition search and retains an open mind as to whether shareholders' best interests would be served by a merger of Water Hall Group with an entity requiring cash and management or by making an acquisition within its own fundable size. Any acquisition of this nature would be expected to be funded through a combination of existing cash resources and a manageable level of debt, plus, if appropriate, an issue of new equity.

Your board's overriding objective is to provide the platform to develop sustainable growth in the share price, both in relative and real terms, and therefore create genuine shareholder value. While the Group has witnessed a significant turnaround in its balance sheet, your board believes that it should follow initiatives likely to result in a better alignment of the share price and the underlying net assets per share. 

Your board believes that this process could be enhanced through improving the liquidity of the shares available in the market to be traded, improved communications with the market and a more easily understood and sustainable revenue and earnings platform.

While 2008 promises to be challenging, the board is confident that it will prove a year of transition for your Company which it hopes will result in it becoming more attractive to a wider range of investors with attendant benefits for all shareholders.

Raschid Abdullah

Chairman

All nine resolutions were carried at the Annual General Meeting held today on 4 June 2008.

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